The crises of the global economy deepen with every new day of the Israeli attack on… Gaza stripAs a result of factors starting from the rise in energy prices and then increasing inflation rates, and continuing through the long-term policy of monetary tightening and pressure on economic growth, it does not end with further fragmentation of global trade, placing obstacles in the way of supply chains, and pressure on the revenues of major companies.
From the beginning of the process “Al-Aqsa Flood” Launched by the Palestinian resistance led by the Al-Qassam Brigades – the military wing of the movement (agitation) – On the seventh of October this year, several parties entered the line, including Hezbollah in Lebanon, as well as the Houthis in Yemen, with the continued threat of Iran, which warned through its Foreign Minister Hussein Amir Abdollahian that “the Middle East has become like a powder keg.” “.
Oil scenarios
The first direct threat, and the largest in terms of value and global impact, as a result of the Israeli escalation against the Gaza Strip comes from the oil sector. The countries bordering the Gulf alone produced 32.01 million barrels per day last August, according to the International Energy Agency, which represents about 23% of supplies. Global crude oil according to the Organization of the Petroleum Exporting Countries (OPEC).
Markets expert at Orbex Egypt, Assem Mansour, says that global oil prices depend during the coming period on developments in the war, the Israeli escalation in Gaza, and the extent of the interventions of various powers in the war, directly or indirectly.
Mansour spoke to Al Jazeera Net about the following scenarios:
- First scenario: Intercepting oil tankers in any of the two straits Hormuz or Bab al-Mandab Or the length of the war, in which case the price of a barrel of oil will likely exceed $100.
- Second scenario: The expansion of the war due to the interventions of other parties, and this means an increase in the price of a barrel of oil to range between 120 and 150 dollars, according to Mansour, who pointed to the impact of the Russian-Ukrainian war, which led to the price of a barrel rising above 120 dollars in March 2022, but he believes that a barrel of oil will not stabilize at levels High, as the market regains its balance and finds alternatives to declining supplies in the event of an escalation of the conflict.
- Third scenario: Oil prices remain at their current levels, or decline if diplomacy succeeds in achieving a ceasefire and returning to the truce.
The importance of the Strait of Hormuz is evident in the fact that about a fifth of the world’s oil consumption passes through it every day. Data issued by the analytics company Vortexa showed that, on average, 20.5 million barrels per day of crude oil, condensates and petroleum products passed through this strait in the period from January to September 2023.
About 80 million metric tons, or 20% of global LNG flows, also pass through this strait annually.
What about natural gas?
Regarding natural gas, Mansour rules out that its prices will be affected to the same degree as oil, given the high number of European countries that announced that their storage level exceeded 80% of their needs, in addition to European countries hedging with more alternatives after the Russian-Ukrainian war by resorting to African countries, but expectations A harsh winter may raise its prices.
Overall, prices are expected to remain in the range of $2.5 to $3 per million British thermal units.
It is worth noting that the rise in fuel would raise global inflation at a time when central banks are trying to curb it through monetary policy tools, including interest rates, which have risen in America to 5.5% since March 2022 and 4.75% in the euro zone to the highest level. Since the launch of the single currency euro in 1999, which has led to further pressure on economic growth.
Safe havens
In times of global tension, investors move away from more volatile assets such as stocks and turn to what are known as “safe havens” to store the value of their money in an instrument such as gold, or to maintain guaranteed returns as much as possible by purchasing bonds with a high credit rating.
Mansour believes that the price of an ounce of gold will reach a level between $2,000 and $2,075 if the aggression on Gaza is prolonged, for reasons including the rise in the price of the dollar and the yield on 10-year US bonds.
If the confrontation expands – the second scenario, according to Mansour – it is likely that gold will exceed the $2075 levels to new record levels.
Gold prices rose by 6.53%, starting from October 9, to reach $1,986 at the settlement of trading yesterday, Tuesday.
Damage to stock markets
Companies remain among those most affected by high inflation, which leads to a decline in their revenues or sales, coinciding with increasing pressures on consumers.
These companies are finding it difficult to obtain financing with the rise in interest rates as part of attempts to curb inflation, according to experts.
The Standard & Poor’s investment-grade corporate bond index – which measures the performance of corporate bonds in dollar terms – fell to 411.52 points, its lowest level since mid-November 2022.
This is the performance of the American and European stock indices from the beginning of the maximum flood until the close of October 24:
- The broader US Standard & Poor’s 500 index fell 0.96% to 4,247 points.
- The US Dow Jones Industrial Average fell 0.36% to 33,141 points.
- The Nasdaq index fell 1.4% to 13,139 points.
- The French CAC index fell 2.1% to 6,893 points.
- The German DAX index fell 1.74% to 14,879 points.
- The broader European Stoxx 600 index lost 2.2% to 435.09 points.
Supply chains
Former Egyptian Suez Canal board member Wael Qaddour says – to Al Jazeera Net – that one of the most prominent outcomes of the current war is the delay in starting an economic corridor between India and Europe through the Middle East, which the White House announced during the G20 summit last September to establish a transport line that passes through Israel to the markets. European.
Regarding the effects of the war on global trade, Qaddour suggested that the impact on global supply chains will likely remain limited as long as the war in Gaza continues, but the transportation sector in the Middle East may receive a double blow if Iran enters the confrontation line and closes the Strait of Hormuz.
As for the Bab al-Mandab Strait, the Houthis pose a threat, according to Qaddour, who said that the Suez Canal is unlikely to be directly affected.
