Opinion: Israel-Hamas War Could be the Tipping Point For a Fragile Financial System
Here's how geopolitical conflicts have their impact on inflation, employment, food prices and other stresses on the global financial system.
The post Opinion: Israel-Hamas War Could be the Tipping Point For a Fragile Financial System appeared first on LUXUO.
Source: Getty Images
Talk show pontifications notwithstanding, the trajectory of the world?s two most serious geopolitical conflicts ? Ukraine and the Middle East ? is unpredictable. In the Israel-Hamas war, the potential for serious escalation is not trivial. These and other uncertainties are aggravating known stresses on the global financial system.
Consider inflation. Slowing price rises have been driven by easing demand, as consumers? COVID pandemic savings dwindle and energy and food-price costs decline. While several factors suggest that inflation may stabilize at around current levels, it could increase for several reasons.
First, on the demand side, strong employment will support consumption. Government deficits, currently around 5 percent and projected to grow, will add to demand. The energy transition, subsidies for strategic manufacturing, semiconductors and war-footing defense spending, will continue to boost spending.
Input costs show no signs of easing. While volatile, energy prices remain under upward pressure due to production cuts by Saudi Arabia and Russia to keep prices at levels which meet their revenue targets. Fuel hungry military activities will influence demand. The threat of ...
The post Opinion: Israel-Hamas War Could be the Tipping Point For a Fragile Financial System appeared first on LUXUO.
Source: Getty Images
Talk show pontifications notwithstanding, the trajectory of the world?s two most serious geopolitical conflicts ? Ukraine and the Middle East ? is unpredictable. In the Israel-Hamas war, the potential for serious escalation is not trivial. These and other uncertainties are aggravating known stresses on the global financial system.
Consider inflation. Slowing price rises have been driven by easing demand, as consumers? COVID pandemic savings dwindle and energy and food-price costs decline. While several factors suggest that inflation may stabilize at around current levels, it could increase for several reasons.
First, on the demand side, strong employment will support consumption. Government deficits, currently around 5 percent and projected to grow, will add to demand. The energy transition, subsidies for strategic manufacturing, semiconductors and war-footing defense spending, will continue to boost spending.
Input costs show no signs of easing. While volatile, energy prices remain under upward pressure due to production cuts by Saudi Arabia and Russia to keep prices at levels which meet their revenue targets. Fuel hungry military activities will influence demand. The threat of ...
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