Brexit’s impact in the Middle East
The Middle East Institute, where I am affiliated as a Scholar, published my short assessment of Brexit’s impact in the region this morning, along with briefs by Paul Scham on Israeli reaction and Alex Vatanka on reshuffling of Syria portfolios in Tehran:
The Middle East seems far from Great Britain, but the reverberations of Brexit will still be felt there. The immediate impact on British and European stock and real estate markets, where Gulf oil sovereign wealth funds and individuals have a lot of money at risk, will be a dramatic fall. The E.U. economy, the world’s largest, was just beginning to pick up. It will likely now return to recession, due as much to uncertainty and lack of confidence as to any real economic impact of Brexit, which will take at least two years to implement.
Seasoned investors will hold on for the ride, but the impact on global economic prospects will be negative and persistent. Oil prices, which had gradually managed to climb back above $50/barrel, will slide again, due to reduced energy demand, a rising U.S. dollar as investors seek a safe haven, and the declining pound and euro. Iran, Saudi Arabia and other Gulf monarchies will feel the renewed pinch brought on by Brexit.
The U.K. and other European states have been important partners for the United States in the Middle East, in particular when intervening militarily in Iraq, Libya and Syria. Allied help will be harder to come by in the future, as the U.K. and the rest of Europe turn inwards and seek to block Middle Eastern immigrants even more vigorously than in the past. Turkey’s European perspective will evaporate. Nativist sentiments in Europe and America will increase, potentially accelerating radicalization, especially among Muslims in the U.K. who largely voted to remain. This will further distance Americans and Europeans from the Muslim world and make the Middle East easier prey for both Russia and extremists.
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