Middle East Unrest To Fuel Oil Inflation

• Posted in OilGas
• on October 8, 2024
• No Comments.

The fight against Hamas by Israel has been intensified recently with recent move by it in target killing and ground advance in Lebanon and Iran joining the fight against the Jewish state by missile attacks. The current situation is tense and it may lead to full-fledged war in Middle East, which may lead to global forces joining the either side in escalation of war.

Talking to Bizz Buzz, M Narendra, former Chairman and Managing Director, Indian Overseas Bank (IOB), said: “It is difficult to fully know the consequences of the ongoing disturbance and tension in the Middle East on the global economy. It is to be seen whether oil prices, which were so far in comfortable position, may rise, if so, it will affect the oil importing countries in terms of foreign exchange outflow and its impact on domestic commodity prices.” India in the recent past has widened its sources for importing oil and we are able to get oil from Russia at competitive prices. However, this will be one of the risks in acceleration in oil prices which will affect India, he said.

The commodity prices, which were also softer on global markets, may go up temporarily, increasing the cost of imports. There may be impact on supply chains and shipping routes which will increase freight costs which can have impact on international trade. However, India has strong macro-economic fundamentals and highest forex reserves comfortable for more than 11 plus months imports which acts as cushion to absorb the temporary upheaval. These rapidly increasing geopolitical ‘hotspots’ will definitely impact all numbers factored into budgets adversely. MV Hariharan, ex-treasury head, SBI, said: “The sustained instabilities will extract higher costs for India, be it in education abroad, jobs and tourism too. Oil is always an ‘elephant in the room’. Banks can feel the pinch of their education loans coming under stress with students in no man’s land with the uncertainties which will get triggered by the political context in play.”

Share This