This text is taken from Courrier de l’ économique. Click here to subscribe.
It is too early to estimate the economic repercussions that could result from the escalation of tensions following the attack launched by Hamas in Israel.
Everyone’s natural reflex was to look towards the oil market. Not because Israel is a major player there, but because it was in the midst of a diplomatic rapprochement with one of the largest producers, Saudi Arabia, which another major producer, Iran, is allied with Hamas and that the Middle East region accounts for a third of global oil exports.
“Everything that happens in the Middle East always presents a high risk of contagion,” warned a geopolitics expert quoted by Radio-Canada on Wednesday.
As the supply of black gold is already relatively tight, the fear is that the slightest disturbance will increase its price, thereby fueling inflation and hampering economic growth. According to the International Monetary Fund (IMF), a 10% increase in oil prices would reduce global economic activity by 0.15 percentage points.
The price of a barrel of oil actually increased as soon as the markets opened the day after the tragedy (+4.2%). However, it then fell again before rising again at the end of last week, for a gain of a little more than US$6 or 7.5%.
The main danger now is that the conflict escalates and spreads to other countries, such as Iran, National Bank analyst Angelo Katsoras argued on Monday. Tehran has accustomed us, in such circumstances, to disrupting maritime traffic in the Persian Gulf, through which 20% of world oil exports pass. Saudi Arabia may be reluctant to increase production to compensate for these supply problems so as not to appear to be siding with Israel’s allies. As for American strategic oil reserves, they are at their lowest level in 40 years.
It’s not just oil companies that could benefit from the situation. There are also those from the defense sector. At the end of last week, the shares of American giants Lockheed Martin (+1.8%) and Northrop Grumman (+5.4%), British BAE System (+5.1%) and French Dassault Aviation (+3 .4%) had all increased slightly.
Conversely, air carriers had lost feathers, like American Airlines (-5.2%), Lufthansa (-1.1%) and Air Canada (-5.4%). . An old safe haven, gold also appreciated modestly (+2.8%). But, generally speaking, the stock markets had not moved much, neither in New York (+0.6%) nor in London (+0.8%).
“Stock markets are usually not very good at estimating the impact of major geopolitical events,” observed a New York broker in the Wall Street Journal at the beginning of last week.
If there’s one thing we didn’t need, it’s another crisis, with this global economy which is already “not sprinting”, but “limping”, the economist observed on Wednesday. Chief of the IMF, Pierre-Olivier Gourinchas. But “I think we have to be careful. It is too early to really estimate the impact this may have.”
This was also the opinion of the Governor of the Bank of Canada, Tiff Macklem, on Friday. “It’s much too early to tell. And it will really depend on how much the situation escalates. »