A day after the anniversary of the 7 October terrorist attack that killed 1,200 Israelis, the Middle East conflict intensified again when Israel deployed a fourth division of troops inside Lebanon, says Seb Starcevic for Politico. The move brings the likely total number of its soldiers in the country to more than 15,000, undercutting prior assurances only a week ago that the operation would be “limited” to “localised and targeted ground raids based on precise intelligence”. The escalation has heightened fears of a “wider regional war” between Israel and Iran and its proxies.

What will a wider spread of conflict mean for the world? 

Until two weeks ago, most of the destruction had focused on an area close to the “blue line” that separates northern Israel from southern Lebanon, says Raya Jalabi in the Financial Times. Now, however, Israel has “dramatically intensified” its campaign and launched a “relentless barrage” of air strikes across the country. 

Christian and Sunni areas, both of which are deeply opposed to the Shiite Hezbollah, as well as parts of Lebanon’s capital, have increasingly been caught in the crossfire, and more than 1.2 million people have been displaced (out of a total Lebanese population of roughly 5.5 million) and 2,000 killed. However destructive, the war is nothing compared with the devastation Hezbollah has itself inflicted on Lebanon, says Bret Stephens in The New York Times. 

The group claims to be a “Lebanese resistance” force, but it is actually an “Iranian occupation force” that has “repeatedly, and often violently, imposed its will on the country’s elected leadership”. As well as helping to assassinate Lebanon’s former prime minister, it has “dragged the country into ruinous wars with Israel”, turning Lebanese civilians into “human shields” and establishing “lucrative sidelines in drug trafficking, weapons smuggling and money laundering”. Indeed, Lebanon “is no longer truly a state”, says Israeli opposition leader Yair Lapid in The Economist. 

Hezbollah’s ruthless actions have left the country with a “ruined” economy and “rampant” food inflation. Nine in 10 children do not receive regular meals, and electricity and water are available “only a few hours a day”. Lebanon will “never recover” for as long as Hezbollah maintains its control, so the only way ahead is to “shatter its military power and the intimidation effect it creates within Lebanese society”. At the same time the world “needs to invest the necessary resources in reorganising Lebanon’s political structure and, importantly, rebuilding its army”. 

Israel’s incursion into Lebanon puts it “on the cusp of a dilemma”, says Marcus Walker in The Wall Street Journal. Air strikes and limited ground raids are unlikely to be enough to end the threat from Hezbollah, yet occupying significant amounts of territory inside Lebanon “could give Hezbollah the opportunity to fight a protracted insurgency against the Israeli army”. Israel needs to learn from the experiences of the two other major Israeli invasions of southern Lebanon, in 1978 and 2006 – both of which inflicted “substantial damage” on Lebanon, but “didn’t achieve lasting security gains”.

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The unending modern tragedy of Lebanon has taken another bitter turn, with the return of war to the country. Since mid-September, Israel has ramped up its military action aimed at eliminating the deadly threat from Hezbollah, the Iran-backed Shia militant group that dominates Lebanese society and controls parts of the country. Since then, many hundreds of people have been killed in targeted attacks aimed at Hezbollah targets, including in densely populated areas where civilian casualties are inevitable. On 27 September, Israeli forces assassinated Hassan Nasrallah, Hezbollah’s powerful leader since 1992, in a series of strikes on the group’s headquarters in Beirut. And in the first week of October, Israel launched what has so far been a limited ground invasion of southern Lebanon – the stated aim being to cripple Hezbollah’s forces and infrastructure in border areas.

How is Lebanon coping?

It’s not. As the crisis deepens, the government is “nowhere to be found”, says Vivian Yee in The New York Times. But that’s just the latest example of the ways in which Lebanon – which has had a caretaker government and no president for the past two years – is already a failing state. The state barely provides any electricity, for example, leaving everyone dependent on generators, if they can afford the fees. Waste disposal systems have collapsed. Crucial workers, such as doctors, nurses and medical technicians, have left the country in droves. Teachers go unpaid. And there have been multiple cases of bank account holders resorting to armed hold-ups in branches in order to access their own money.

The country’s agony has somewhat faded from the headlines since the collapse of its financial system in 2019, and the Beirut port blast in August 2020, which wrecked whole neighbourhoods of the capital and destroyed any lingering faith in the nation’s politicians. But its economic and societal crisis – fuelled by long-term mismanagement, corruption and inability to service high debts – has only intensified. Since the default on $30 billion of international bonds in 2020, few investors have the stomach for investment in a country once known as the Switzerland of the Middle East. Per-capita income fell from about $9,000 in 2018 to around $3,000 now. GDP cratered from $59 billion to $22 billion in the same period. The Lebanese pound (or lira) has lost 95% of its value. Estimates of the proportion of the population below the poverty line vary from 45% to 75%.

How has Lebanon gone unnoticed for so long?

The economy has been shrinking since 2011. And since it fell off a cliff in 2019 – with what the World Bank assessed as the biggest peace-time economic collapse since the 19th century – the global economic backdrop has been grim. The Covid pandemic hit Lebanon’s tourism-dependent economy especially hard, hindering attempts to turn things around and fuelling inflation. The country has suffered from the mass emigration of wealthy professionals, while also struggling with the integration of around 750,000 refugees from neighbouring Syria. More broadly, says Imad El-Anis in The Conversation, Lebanon has simply “not had a fully functioning set of state institutions for much of the past five years”. Since the 15-year civil war that ended in 1990 (and saw a million people leave the country) the country’s complex political system – aimed at balancing the tensions between different communities – has frequently led to conflict and stasis. Even following the financial collapse and national humiliation of 2019-2020, its political class has proved unable to overcome the intense rivalries and feuds that have stymied stable government for so long.

Any grounds for optimism?

There are some, yes. Last year, GDP stabilised, with a marginal contraction rather than a slump. Lower commodity prices and higher remittances (from Lebanon’s 15-million-strong diaspora) helped reduce pressure on the current account. In addition, up until the Hamas attack on Israel on 7 October 2023, Lebanon had seen a big rebound in number of tourists, bringing in much-needed hard currency. In the spring of 2024, annual price inflation returned to under the 100% level for the first time in four years, largely due to the creeping dollarisation of the economy. Dollarisation has eased inflation, but has also made life harder for people who are still paid in Lebanese pounds and don’t have access to foreign currency. Meanwhile, on official figures, inflation dipped sharply from late 2023 onwards (to 70% in March this year, and 35% in July, well below its shocking peak of 269% in April 2023). The Lebanese pound also stabilised in the black market from the summer of 2023 onwards, also contributing to lower (yet still cripplingly high) inflation. Exchange rate volatility eased after the central bank introduced measures aimed at unifying the multiple exchange rates in the economy.

Is there hope for Lebanon?

It’s possible that, in the short-term, the economy may be even worse off without Hezbollah, says David Rosenberg in Haaretz – in particular the hundreds of millions of dollars in annual funding it receives from Iran. More optimistically, the elimination or weakening of the militia might “remove its baleful influence” and let Lebanon start to rebuild. Aid and investment flows from the Gulf and the West might restart. More serious efforts at exploiting offshore natural gas reserves could get underway. Before the crisis of 2019, Lebanon had a strong education sector and still has several well-regarded universities. It also has a “long history of entrepreneurship”, a large and engaged diaspora, and a culture on which to build a modern “knowledge economy”. All is not lost. But nor, alas, can the risk of collapse be ruled out. A failed state at the heart of the Middle East is in no one’s interest, whatever the outcome of the current fighting.

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Mpox is a viral disease originating in central Africa that causes skin rashes and lesions along with flu-like symptoms. Most cases typically present with mild symptoms, and there is complete recovery within two to four weeks. However, in severe forms, the disease leads to brain inflammation and sepsis, and can be fatal. The disease was first identified in captive laboratory monkeys in Denmark in 1958 and was formerly known as monkeypox. In addition to monkeys, the virus has been detected in Gambian pouched rats, dormice and African squirrels, which are often used as food. The first cases in humans were identified in 1970, and sporadic cases were reported in central and east Africa in the decades since then. A major global outbreak occurred in 2022-2023, and there are now widespread fears of a far worse one. Last month, the World Health Organisation (WHO) declared Mpox an international public health emergency of major concern, in response to a deadly outbreak in the Democratic Republic of Congo (DRC).

How is Mpox transmitted?

It’s a so-called “zoonotic” disease, which is spread from animals to humans via bites or scratches, or activities such as hunting and skinning infected animals. The pathogen enters the body via broken skin, or “mucosal” surfaces such as the mouth and respiratory tract, and can then be passed on to others during prolonged periods of intimate face-to-face interaction, in particular, that involving close contact and touching. During the recent global outbreak – the first of its kind since the identification of the virus – human-to-human transmission was almost exclusively via sexual contact (and mostly affected men who have sex with men). The outbreak spread from Africa to 115 countries, on every continent, where Mpox had never been seen before, resulting in about 100,000 reported cases globally and roughly 200 known deaths, though this is widely thought to be an underestimate. Internationally, the first cluster of cases was found in the UK, linked to a patient who had visited Nigeria.

What’s happening this time?

Already, far more people have died of Mpox – with more than 1,300 known deaths in the DRC alone. Almost 30,000 cases have been identified in that country, and the virus has spread to neighbours including Burundi, Rwanda, Uganda and the Central African Republic. Two cases have been reported in Sweden and Thailand, both in people who had recently visited the region. There’s a crucial difference this time: a different strain of Mpox is involved, which is more dangerous and more deadly – the “clade 1” version and, in particular, a strain known as “clade 1b”, which has a fatality rate of between 1.4% and 10%. Sexual activity is still a primary means of transmission. Female sex workers, their male customers and gay men are all highly vulnerable groups and are hard for health workers to reach in countries where prostitution and homosexual acts are illegal. But this time, unlike in the previous outbreak, many of those with Mpox are children. According to the Africa Centres for Disease Control, almost 70% of Congolese cases are children aged under 15, and they account for 85% of the deaths. One medical charity running an isolation site near Goma (a city in the DRC on the Rwandan border) says 75% of cases there have been children under 10.

Why are children so vulnerable?

Children are more likely to have weaker immune systems due to malnutrition, recent cholera and measles outbreaks, and untreated HIV infections. They may also be more vulnerable because Mpox has some similarities to smallpox; older generations who had the smallpox vaccine may have some protection. Another reason for the rapid spread, says Leana Wen in The Washington Post, is the ongoing civil unrest in the DRC. In the eastern provinces of North and South Kivu, nearly a million displaced people are living in desperately crowded refugee camps, including hundreds of thousands of children – an ideal breeding ground for the virus. Meanwhile, the M23 armed rebels in control of swathes of North Kivu falsely claim there are no cases there.

Will Mpox become a pandemic?

According to Airfinity, a health-data firm, London and Dubai are the global cities at greatest risk of importing the new strain. However, “Mpox is not the new Covid”, says the WHO. There is every chance of the outbreak spreading globally and causing deaths. But Mpox is harder to pass on and there is no evidence the virus spreads easily, like Covid, via respiratory droplets and airborne particles. Moreover, children in rich countries are healthier and better nourished, and far less likely to become infected. On the other hand, there’s no room for complacency. The WHO’s confidence depends partly on the outbreak in Africa being contained – and at the moment it isn’t.

What about vaccines?

The global population’s collective immunity against pox viruses has deteriorated in recent decades after the eradication of smallpox in 1980 meant that vaccines were no longer necessary, says The Economist. Vaccines against related pox viruses provide some immunity from Mpox, but scientists are not yet certain how effective they are. Last month there was disappointment when an antiviral drug, tecovirimat, also known as TPOXX – which had shown promising results against clade 2 – did not reduce the severity of illness with clade 1. International help has been slow to arrive, in part due to hold-ups in approving new vaccines. But last week the first donation of Mpox-specific vaccines – 200,000 doses of Bavarian Nordic’s Imvanex vaccine – were sent to Kinshasa, as part of an EU donation programme. In all, about 380,000 doses of Mpox vaccines have been pledged by donors including the EU and US, according to Africa CDC. However, three million doses are needed. Distribution will be difficult. Of the two main vaccines, one needs refrigeration; the other uses a rare specialised needle. What Congo is crying out for is more help, says The Economist. “Because all countries stand to benefit, all should contribute what they can to organising a swifter, more rational response.”

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Following days of rocket and missile exchanges between Israel and the Iranian-backed terrorist group Hezbollah, the confrontation took a “more ominous turn” when Iran launched another round of direct missile attacks on Israel at about the same time as Israel began a limited ground invasion of Lebanon, says The Economist. Iran’s actions suggest the “full-blown regional war that many have feared”, ever since the terrorist attacks of 7 October 2023, “now looks closer than ever”.

Will the Middle East crisis escalate?

The latest round of Iranian missile strikes, most of which were shot down, underlines the weakness of the Iranian regime, says Marc Champion on Bloomberg. The clerics in Tehran have seen Hezbollah, their “most powerful asset”, “decapitated and degraded” by the death of “one Hezbollah commander after another”, including the group’s leader Hassan Nasrallah, as well as the assassination of Hamas’s leader in Tehran. Israel is “clearly having a lot of military success right now”, and Hezbollah has been pushed further back into Lebanon. The resulting loss of credibility is dangerous for an “unpopular, repressive regime”. 

Israel’s defences were so effective that the damage to the military and civilian sites that Iran targeted is “minor to non-existent”, says Jonathan Spyer in The Spectator. But, in response, Israel is unlikely to repeat the “small and largely symbolic” strikes it launched last April, as it is aware this would probably be interpreted as “hesitation – and hence weakness”. It would encourage the mullahs in Tehran to see massive missile attacks on Israel as “part of the rules of the game”, which could lead to a similar response “every time Israel takes major action against an Iranian proxy”. This time, Israel is likely to “hit back hard”. 

Will the US intervene?

Iran’s attack on Israel also presents a dilemma for the US, says Gideon Rachman in the Financial Times. On the one hand, the US has said it will “work with Israel” to ensure there will be “severe consequences” for Iran, implying some form of support – perhaps even joint military action. However, it is also worried this may spark a wider war in the Middle East, one that “might draw in the US or wreak havoc on the world economy”. So, behind its “tough talk”, the White House may still be urging Israel to “calibrate its response and to not hit back so hard that Iran feels compelled to up the ante again”. 

US president Joe Biden may have been putting “heavy pressure” on Israel to rein in its responses to a “symbolic minimum”, but it would be a “mistake” to give the same advice now, says Bret Stephens in The New York Times. Even a weakened Iran presents an “utterly intolerable” threat, not just to Israel, but to the United States, and “whatever remains of the liberal international order”, via Iran’s use of proxies around the Middle East, from Lebanon and Gaza to Yemen. 

This requires a “direct and unmistakable” US response that targets the production of missiles and uranium and sends a signal that Iran’s “vast and vulnerable network of pipelines, refineries and oil terminals” will be next, unless it orders its minions to “stand down”.

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The global financial crisis of 2008 was triggered by a bubble in the US housing market. Lightning rarely strikes twice, however, and American residential property seems unlikely to be at the centre of another collapse.

So where might the next crisis come from? Bankers and lawyers say the corporate debt market is the frothiest they have seen since 2007, Oliver Shah points out in The Sunday Times. The most obvious sign of irrational exuberance is the resurgence of "covenant lite" or "cov-lite" loans. This kind of debt, which offers little or no protection to lenders if the loans go sour, boomed in the years leading up to the financial crisis, "with the inevitable outcome". They then went out of fashion but are now "back with a vengeance". In the US, cov-lite loans account for a record 75% of the $790bn in outstanding leveraged loans. In Europe, cov-lite leveraged loans doubled in value last year.

Private equity is another area gathering steam rapidly. Funds have been raising money at the fastest rate in more than a decade, says Javier Espinoza in the FT. This includes those that invest in infrastructure and real estate. "Buyout executives are rushing to tap" demand from investors "just as fears grow of a market correction".

The average time taken for a private-equity fund to raise the money it wants has halved to one year since 2010. This is the fastest pace in over ten years. "None of this necessarily means we are on the brink of Armageddon," says Shah. But this froth in debt and stockmarkets is at odds with the "drab economic backdrop" and political uncertainty. The disparity has been clear for some time, but "investors and traders have seemed happy to party on". When it all comes to an end once again, things are bound to be messy