Navigating Geopolitical Risks: How Middle East Conflicts Affect the Spanish Economy

The Middle East’s geopolitical tensions are intensifying and causing significant consequences for the population, which is also having surprising impacts on the Spanish economy. The uncertainty in the region is undermining confidence, making it difficult for investments to take off, which is essential for the country’s growth. The rise in oil prices and complications in maritime transport near conflict zones are hindering disinflation and eroding purchasing power.

Spain, despite these challenges, is attracting significant international investment due to its low labor and energy costs compared to other economies in the region. This has led to announcements of new positions in various sectors such as technology, energy, and automobile industries. Large international investors see Spain as a favorable destination for investment, unlike smaller local businesses that are still grappling with the aftermath of the financial crisis.

The disparity between international and local investors highlights the need for economic policies that support small and medium-sized businesses in Spain. Initiatives like the co-financing project by Cofides aim to provide resources to strategic sectors and support intermediate-sized companies. However, more decisive actions, such as financial union at the European level, may be needed to stimulate investment among smaller businesses.

The investment deficit in Spain, particularly among smaller companies, calls for a medium-term budgetary plan to unlock funding for these businesses. While larger corporations continue to attract foreign capital, smaller businesses are struggling to access financing and navigate uncertainties in the market. The global environment’s volatility poses challenges for Spanish SMEs, especially as conflicts in the Middle East persist and potentially escalate.

Despite these challenges, foreign direct investment in Spanish companies remains strong, with investors from the EU