War in the Middle East always brings with it the danger of wider conflict and economic turmoil that eventually engulfs the entire world.
The onset of the Israel-Gaza crisis comes amid surging energy prices, inflation and the threat of economic recession and mounting international tensions between Russia and China and the West over Ukraine.
There are eerie parallels with exactly 50 years ago this month, when the October War of 1973, fought between Israel and an Arab coalition led by Egypt and Syria, threatened to turn the Cold War hot.
It would lead by the end of the year to an economic crisis in the West, that began with massive queues at petrol stations and driving bans and ended with families living by candlelight.
It was also the moment that saw the oil-producing countries of the Arabian Gulf emerge as major players on the world stage, truly flexing their economic and political muscle for the first time, quadrupling the price of oil in just six months, followed by full-scale oil embargo on exports to the United States.
These last two events made the headlines, but the root cause of the crisis came well before fighting broke out in October 1973, and the US angering Arab countries by sending billions of dollars in arms to Israel.
A vitally important financial mechanism had for years linked the exchange rate of currencies to the US dollar, which in turn was fixed to the price of gold. Known as the Bretton Woods agreement, it had paved the way for reconstruction and economic stability after the Second World War.
By the 1970s, the massive costs of the Vietnam War and increasing US domestic spending meant the dollar was heavily overvalued. Looking to boost the US economy, President Richard Nixon decided in 1971 to effectively decouple the dollar from gold.
The result was a heavy fall in the early 1970s of the dollar against other major currencies. For the oil producers this was bad news, with the price of a barrel of oil fixed in dollars. Export values slumped, with oil now worth less than it had been in the 1940s.
“The embargo is important for the history of the Middle East from a political point of view, and is related just to the Arab petroleum-exporting counties,” says Giuliano Garavini, professor of international history at Roma Tre University and author of The Rise and Fall of OPEC in the Twentieth Century, which he wrote while a guest academic at New York University Abu Dhabi.
“The price shocks were Opec, which is a global organisation. It's not an Arab organisation. It's an organisation where there were counties that were actually supporting Israel.
“The reasons were economic and had to do with the fact that the price of oil was lower than it was in the Second World War, that it was basically given for free.”
There was growing anger among the members of the Organisation of Petroleum Exporting Countries (Opec), created in 1960 as a counter to the grip of the “Seven Sisters”, the major oil companies, five of which were American.
By the summer of 1973, rumours were swirling that the Arab members of Opec would take action, including a boycott of exports to the US, which still obtained a sizeable proportion of its oil from the Middle East.
UAE's strong stance
The issue was addressed by Sheikh Zayed, President of the UAE, in an interview with a Lebanese magazine Al Hawadeth in August 1973, nearly three months before the war.
"If the Arabs decided to cut off oil from America, I would certainly cut it off too. Whenever the Arabs decide to cut off we do likewise, and where ever they go, we go,” Sheikh Zayed said, adding: “Arab solidarity, not oil, is the best guarantee for the future.”
He then asked why the US was disproportionately supporting Israel against the Palestinians, saying: “We, the Arabs, do not interfere in America's affairs. We do not ask for your support, but we urge you to keep neutral. If you find it impossible for you to support the owner of what is right, then you should not support our enemy to overcome us.”
This was the backdrop to the outbreak of war on October 6, which initially saw Egypt’s forces sweep across the Suez Canal and into occupied Sinai.
As Israel launched counter-attacks, it was clear both sides were running short of weapons and ammunition.
With Egypt and Syria supplied by the Soviet Union, Washington began shipments to Israel on October 12, turning the conflict in a proxy for the Cold War. Fearing Russia might also ship nuclear weapons, the US placed its own nuclear forces on Defcom 3, the highest state of peacetime alert.
Four days later, Opec met in Kuwait. Top of the agenda was not the war, but the dwindling value of oil. On October 16 it was agreed to raise the price by around 70 per cent, from just under $3 a barrel to nearly $5.
The following day, the Arab members of Opec turned their attention to the war, agreeing to a rolling cut in production of 5 per cent each month until Israel returned to its pre-1967 borders. A full boycott of the US was resisted by several counties, including Saudi Arabia, who wanted to preserve relations with Washington.
This changed on October 19, when President Nixon asked the US Congress to approve a massive $2 billion arms package for Israel. Worth $14 billion at today’s prices, this brought an immediate response from the Arab Opec members, ending exports to the US on October 21 and to the Netherlands, which had also been supplying Israel.
Emboldened by this unprecedented show of unity, the use of oil as an economic weapon saw the boycott extended to colonial and racist regimes, including South Africa, Rhodesia – now Zimbabwe – and Portugal, fighting a colonial war in Angola, Mozambique and Guinea-Bissau.
Meeting in Algeria in late November, the Arab heads of state adopted a resolution proclaiming they would “continue the use of oil as a weapon in the battle until the withdrawal from occupied Arab lands is realised and the national rights of the Palestinian people are ensured”.
King Faisal bin Abdulaziz also warned European countries that cuts in production would hurt their economies. “Accordingly, it is up to these countries to advise America to change her pro-Israeli attitude, for it is these countries that will be damaged more than America by the reduction of the quantity of oil.”
Covering the conference, The New York Times noted that: “Day by day, the Arabs have been using oil as a more precisely calibrated weapon to effect their desires.”
By then, the fighting had ended, with a ceasefire declared on October 26. But a full-scale economic crisis was now raging. The US was faced with the unprecedented sight of motorists queuing for hours to get their allowance of petrol, while a national speed limit of 88kph (55mph) was introduced to reduce consumption.
Things were worse in the Netherlands, where rationing from the Second World War was reintroduced and a ban on driving on Sundays saw some people turn back to the horse for transport.
Even countries seen as neutral or friendly to the Arab world, such as the United Kingdom and Japan, could not escape the huge price rise, which saw oil rise from $3.38 a barrel in September to more than $11 by December.
In Britain the oil price rise fed into increasing inflation, peaking at 24 per cent in 1974. Emboldened, the miners' unions joined workers in the electricity industry to push for pay rises of 43 per cent that resulted in strikes and a direct conflict with the Conservative government of Edward Heath.
By December, the energy crisis and power shortages saw industry placed on a three-day week, with rolling power cuts. Shoppers were guided by gas lamps through stores on London’s Oxford Street and families spent their evenings by candlelight. The Heath government would fall in February.
For the next two years, western countries were hit with a severe economic downturn that saw record unemployment and a recession in the US and many European countries.
The embargo ended on March 14, 1974. It had become increasingly ineffective as countries sourced supplies from outside the Arab world. The war had ended months ago, with diplomacy that would see Israel hand back Sinai and gain diplomatic recognition from Egypt.
But, combined with price rises, it had broken the grip of the big oil companies and handed the whip hand to Opec. Among many Europe countries and in Japan, it marked a greater understanding and support for a settlement that recognised the rights of Palestinians for a homeland.
“But it also generated that enormous backlash against Gulf countries in general, and especially in the United States, that they were identified with an effort of blackmailing,” says Prof Garavini.
For the oil-producing countries of the Arabian Gulf, it brought greatly increased wealth through better prices, but also changes to their world role and how they were perceived in many countries, particularly in the developing and wider Muslim world, with aid projects.
This period also marks an unprecedented time of unity among the Arab countries. Half a century later, it has never been repeated.