A good rule of thumb for economists is to caveat any projection with the statement that an ‘exogenous shock’ could upend any rosy forecast. A war in the Middle East is an exogenous shock, and we should steel ourselves to the possibility of international affairs pushing the U.S. into recession. In this column, I’ll explain how this could happen, why I don’t think it will, and where I’m most likely to be mistaken.

My bona fides here are as an economist, as well as an infantry officer who fought in one Middle East war, participated in a Middle East peacekeeping mission, and shared foxholes with Saudi, Egyptian and Jordanian soldiers.

Armed conflict is always economically damaging for two major reasons. First, it introduces higher risk and uncertainty on trade flows and capital investment. Second, wars kill people and break things that are productive. Wars might boost the domestic production of arms or increase prices for some commodities, but they always leave the economic factors of production worse off than if there were no war.

This doesn’t mean armed conflict isn’t necessary or won’t make the long-term growth prospects better. The liberal, democratic order is the only system that allows for long-term prosperity the world has experienced. So, wars that successfully promote democracy generally make a nation better off. Most countries that lose wars to democracies emerge better off from the experience.

The 1973 Yom Kippur War certainly helped push the world into recession. The 1990-1991 Gulf War also ushered in an economic downturn. In both instances, oil supply stability was a central economic issue. In 1973, oil-producing nations pushed an embargo on nations that supported Israel. That had the effect of limiting supply and pushing us, and much of the world, into recession.

In 1990-1991, the invasion of Kuwait led to inevitable restrictions on exports from the Iraqi-occupied oil fields and risked spreading conflict across more of the Persian Gulf. That raised oil prices, which affected the production costs of most goods and services. This helped push the U.S. and Europe into recession.

The Russian invasion of Ukraine had a similar effect, since it led to restrictions on the sale of Russian petroleum. However, here in the U.S., expanded production capacity limited the economic damage.

In all these examples, the rising cost of petroleum pushed throughout the economy, affecting the movement and manufacturing of goods. This ‘exogenous shock’ came from outside normal economic activity. Thus, investors moved their assets to safer venues. So, money flowed out of stocks and into bonds and safer financial instruments. This movement away from productive investment slows overall economic activity.

However, as the U.S. recedes from high inflation and rising interest rates, it is not at all clear that higher demand for bonds would be economically unwelcome. That would reduce interest rates, putting downward pressure on the U.S. deficit and allow the Federal Reserve more room for stable monetary policy. If you wanted to damage the global economy, this was a bad time to attack Israel.

The global economy’s problem today is that it has been too inflationary, so a negative shock today works to ease the global economy’s biggest problem, not worsen it. But, I don’t think that is the most likely reason that the world will escape recession in this war. The global economy will be spared a downturn because this war is unlikely to widen substantially.

The Middle East is in the midst of change towards a more democratic environment. Though it is agonizingly slow, the bright spots are apparent. Saudi Arabia and other gulf states are seeking to modernize. They are aware that this means to liberalize and expand democracy. There’s reason to believe this will be uneven, with some false starts and reversals. But, the need to do so and the trend are clear. By century’s end, oil will not be their economic salvation.

North African states have come through an Arab Spring, with mixed results. None of these nations are now strong enough to consider war with Israel. More importantly, there’s very little enthusiasm for the Palestinian cause, and almost none for Hamas. Hamas is an anti-modern movement in a region desperate to modernize. To be sure, there’ll be public statements in support of Palestinians. But, with support from the deeply distrusted Iran, Hamas has few friends across the rest of the Mideast.

I would be very surprised if any nation came to the support of Hamas or the Palestinians with more than words and humanitarian supplies. The inability of Palestinians to create a stable government over 75 years has exhausted the patience of most in the region. Moreover, the Palestinians who moved to Lebanon have so helped destabilize that nation, that no one else will welcome them as refugees.

None of this means that this war won’t be lengthy and painful. Unlike 1967 or Yom Kippur, or Desert Storm, this is not a clash of armies. Hamas is a marginally effective terrorist organization with a bad political arm. Their attack on Israel was purposefully designed to cause the resulting invasion of Gaza and displacement of much of their own population. That is why they recorded the rape of prisoners and decapitation of children. They want this to be as publicly inhumane as possible.

I suspect they’ve made a strategic blunder, possibly at the urging of Iran. When Israel gets through with Gaza, Hamas will cease to exist, and no one will be better off for it that the Palestinians. Hopefully, the Palestinians will then remake a government that values them, rather than operating as a proxy for Iran. In the short term, the economic effect of this on most of the world will be trivial. I think the biggest risk lies with the involvement of Iran.

Iran won’t come to the direct aid of Palestinians. They don’t have the ability to do so effectively. To Iran’s leadership, the Palestinians are nothing more than useful pawns. But, if there is strong evidence that Iran funded and encouraged this attack on Israel, then conflict seems inevitable. That evidence is not yet public. If it exists, a war between Israel and Iran seems certain.

I am hopeful that such a war would be limited to the destruction of Iranian ports, oilfield, military installations, nuclear refinement facilities and ultimately regime change. Most of the Arab world will quietly applaud Israel in so doing. This will introduce significant global risk. A wider war between Israel and Iran will almost certainly precipitate a global recession. Ending Iran’s 40 years of exporting terrorism might well be worth it.