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Growing tensions between Israel and Iran threaten global economic stability
International experts and other experts have raised concerns about the global economic impact of the conflict between Israel and Iran, with the United States joining the conflict by launching airstrikes on three nuclear facilities in Iran over the weekend.
The recent escalation of the conflict between Israel and Iran has sent shockwaves through global markets, raising alarms about potential economic repercussions around the world.
Over the weekend, the United States launched airstrikes on three Iranian nuclear facilities, further intensifying the already fraught situation.
International relations expert, Dr Noluthando Phungula, on Monday said that on a socio-economic aspect, the escalation of conflict is likely to see instability in exchange rates and oil prices.
"Sadly this will be felt most in poorer nations. The South African government has been dragging its feet in terms of coming out on its position," she said.
"This has been the case with politicians that are often vocal on social media platforms. This makes complete sense considering the recent SA - US disastrous meeting."
Malcolm Hartwell, Norton Rose Fulbright director and master mariner, said that recent reports reflected that Iran may attempt to close the Strait of Hormuz in response to the US attack on its nuclear facilities over the weekend.
"Approximately 20% of the world's oil passes through the Strait of Hormuz, which means the closure would have an immediate and dramatic effect on oil prices throughout the world," Hartwell said.
"It would also have a devastating effect on the economies of the oil-exporting countries surrounding the Arabian Gulf, which rely entirely on the Strait of Hormuz for all of their exports. This includes the UAE, Saudi Arabia, Kuwait, Iraq, and, ironically, Iran."
Hartwell said whether Iran was able to close the Strait to civilian tanker traffic remained to be seen, as the US has positioned two of their carrier fleets in that region to respond to any retaliation by Iran.
"Whether the conflict escalates or not in the near future, there is no doubt that the threatened closure will impact oil prices, which would have a negative effect on all of the oil-dependent economies and on global trade generally," he said.
"The immediate impact on the global logistics sector (outside of the tanker market) would be an increase in fuel prices, which would ultimately be passed onto importers and exporters responsible for 80% of the world's trade. This will ultimately have to be passed onto the producers, manufacturers, and consumers who rely on sea trade."
Hartwell added that for those trading to and from the Arabian Gulf, closure of the Strait of Hormuz would have a massively disruptive effect on their operation.
"The closure itself would not have an immediate and direct effect on South Africa other than the increase in oil price, shipping costs, and the disruption to import and export driven economies mentioned above," he said.
The Strait of Hormuz services only the Arabian Gulf, which means its closure does not have the same effect on maritime traffic around South Africa's coast as we saw with the closure of the Suez Canal, which forced many shipping lines to divert around South Africa.'
Annabel Bishop, the chief economist at Investec, said the petrol price increase building for next month in South Africa was around R0.50/litre so far.
She said this was due to the lift in the oil price on concerns over supply disruptions in the Middle East to the current $78 per barrel from $67 per barrel two weeks ago.
'A further escalation in the Middle East crisis, which is not unlikely, would see the oil price rise further, and indeed Brent crude is expected to breach the $80 per barrel mark in the near-term on market worries, while the US dollar continues to tick up mildly,' Bishop said.
Waldo Krugell, an economist at North West University, said that the closure of the Strait of Hormuz was the key thing for oil supply.
"About 20% of global supply goes through there. Scenarios show that could move the price to $90 per barrel," he said.
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