A few days ago, a write-up in these columns talked of how the so-called panacea that globalisation offered was questioned due to its less-than-favourable effect during tough times.
Recent outbreaks in the Arab world, and the resultant effects, or the fears thereof, on the global economy seem to accentuate the downsides of a truly global economy further.
The systemic impact of Egypt and Tunisia was not as great as that for Libya. And it doesn take a lot to decipher the reason - oil. With exports of around 1.6 million barrels per day, Libyan oil is less than 2.5 percent of world oil production, but it is still amongst the top 15 oil exporters of the world.
This kinship of Libya with the king of commodities gave birth to fears of supply uncertainties, driving up the prices of oil to as much as $115 a barrel on Tuesday.
Interestingly, the entwined global economy gets to bear the brunt because the ramifications of oil price increase are felt on several other sectors and countries as well. Reuters claims that forecasters estimate a slash of around 0.5 percent in global growth for the next 12 months, for every $10 increase in oil prices.
Production costs are rising in major economies of the world as oil scurries to new heights. Surveys show an increase in input costs across the globe, and resultant inflationary pressures.
Eurozone inflation in February rose to its highest levels since 2008, scaling up anticipations of an interest rate hike to cool down inflationary pressures.
For emerging economies, such as India and China, which were already battling with overheated economies, inflationary fears are even more pronounced.
Restrictive monetary policies are, consequently, expected, with a slowdown in overall global growth.
An environment of such turmoil and uncertainty renders the lustre of equity investments a tad dubious, instigating investors towards safer investment options such as gold and silver amongst commodities, and the Swiss Franc and Yen amongst currencies.
The golden crisis-lover reached three-month highs earlier this week, close to a record high of over $1430 an ounce reached on December 7 last year.
But an even graver concern that has kept investors and analysts at the edge of their seats are fears of a similar break-out in Saudi Arabia - the largest world exporter of oil.
The Saudi government shares the characteristics of autocracy with the other riot-ridden Arab countries.
Besides, "The unrest in Bahrain - just 15km from Saudi Arabia - poses very serious questions for the Saudi royal family. Bahrain...(is) threatened by an uprising by a majority Shia population. The Saudi royal family are also ruling over a large (minority) Shia population, concentrated in the oil-rich eastern provinces," said Gideon Rachman, chief foreign affairs commentator at the Financial Times.
A lot hinges on whether the Saudi fears will materialise. Will the surge in oil prices lead to only a "temporary and relatively modest increase in U.S. consumer price inflation" as Bernanke stressed, or will the domino effect be more profound than one could have imagined?