Global geopolitical tensions often play a pivotal role in shaping people’s perceptions of economic growth. Research shows concern about such issues can cause people and businesses to become more cautious about spending and investing, which can ultimately lead to economic recession.The recent escalation of the Israel-Palestine conflict is no different. Investors around the world are worried about the repercussions of this war – particularly in light of an already bleak picture for global economic growth.Internal and inter-state conflicts often have a significant effect on stock market indices, exchange rates, and commodity prices – sometimes even sending prices higher in the lead-up to hostilities. The longer-term economic impact is typically more complicated to assess, however. The lasting effects of even seemingly dramatic events on investor behaviour can be hard to predict.This uncertainty is reflected in the risk premium in oil markets. This is the price paid for oil traded ahead of time in the futures markets versus the real-time price of oil. It reflects the profits that speculators expect to receive from buying and selling oil during a time of conflict, as well as the hedging needs of businesses that produce and consume oil and their concerns about supply and demand.And so, the effect of the latest Israel-Hamas conflict on global financial markets will depend on the involvement of other major regional powers. If the conflict remains between Israel and Hamas, the effect will probably be limited and arguably exclusive to countries with direct trade exposure to Israel or Palestine.But if the conflict spreads to major oil-producing nations in the region such as Iran, the global economy could face severe repercussions as energy costs for businesses and households could spike if supply is interrupted.Higher energy prices would hamper central banks’ efforts to tame inflation pressures in most advanced and emerging economies. If this leads to a “higher for longer” monetary policy that keeps interest rates elevated, it would push up the cost of borrowing and refinancing by governments, companies and people.Under these circumstances, investors are already bracing for increased financial volatility across the board – from stocks and government bonds to commodity markets. So-called safe-haven assets like gold are typically used as protection against overwhelming economic uncertainty. The price of gold has shot up following the latest escalation in the Israel-Palestine conflict.Financial markets will continue to monitor the conflict between Israel and Hamas for signs of escalation. Anything that pushes oil prices up further will reignite fears of higher inflation. 1.1 With reference to the case study above, and considering the statement made by the South African President, that South Africa supports Palestine, evaluate the legal environment South Africa may have to deal with in trading with Israel supporting countries Please note: additional research must be conducted. Note: it must be from credible sources (textbooks and journal articles). Answers must be presented in a suitable structured argument.
Global geopolitical tensions often play a pivotal role in shaping people’s perceptions of
The recent escalation of the Israel-Palestine conflict is no different. Investors around the world are worried about the repercussions of this war – particularly in light of an already bleak picture for global economic growth.
Internal and inter-state conflicts often have a significant effect on stock market indices, exchange rates, and commodity prices – sometimes even sending prices higher in the lead-up to hostilities. The longer-term economic impact is typically more complicated to assess, however. The lasting effects of even seemingly dramatic events on investor behaviour can be hard to predict.
This uncertainty is reflected in the risk premium in oil markets. This is the price paid for oil traded ahead of time in the futures markets versus the real-time price of oil. It reflects the profits that speculators expect to receive from buying and selling oil during a time of conflict, as well as the hedging needs of businesses that produce and consume oil and their concerns about supply and demand.
And so, the effect of the latest Israel-Hamas conflict on global financial markets will depend on the involvement of other major regional powers. If the conflict remains between Israel and Hamas, the effect will probably be limited and arguably exclusive to countries with direct trade exposure to Israel or Palestine.
But if the conflict spreads to major oil-producing nations in the region such as Iran, the global economy could face severe repercussions as energy costs for businesses and households could spike if supply is interrupted.
Higher energy prices would hamper central banks’ efforts to tame inflation pressures in most advanced and emerging economies. If this leads to a “higher for longer”
Under these circumstances, investors are already bracing for increased financial volatility across the board – from stocks and government bonds to commodity markets. So-called safe-haven assets like gold are typically used as protection against overwhelming economic uncertainty. The price of gold has shot up following the latest escalation in the Israel-Palestine conflict.
Financial markets will continue to monitor the conflict between Israel and Hamas for signs of escalation. Anything that pushes oil prices up further will reignite fears of higher inflation.
1.1 With reference to the case study above, and considering the statement made by the South African President, that South Africa supports Palestine, evaluate the legal environment South Africa may have to deal with in trading with Israel supporting countries
Please note: additional research must be conducted. Note: it must be from credible sources (textbooks and journal articles). Answers must be presented in a suitable structured argument.
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