The circle of influence on the global economy is expanding after the development of the repercussions of Israel’s war on the Gaza Strip, following direct strikes by the United States and Britain on the Houthi group in Yemen, and waiting to see whether the response will expand beyond Israeli ships heading to Israel.
Navigation continued in the Red Sea before those American attacks. Despite a number of major companies announcing that they were avoiding the waterway, oil tankers continued their usual path, as well as other shipping companies that were content to avoid Israel in order to pass safely through the Bab al-Mandab Strait.
After the United States called on the countries of the world to participate in establishing the Guardian of Prosperity coalition to curb Houthi attacks, the group responded by emphasizing that its attacks only target ships heading to Israel and that there is no need to establish this coalition, hinting at targeting commercial ships of the countries participating in the coalition.
Latest development
In the latest development in the crisis in the southern Red Sea, the US Army said – in a statement – that it lost two members of its navy while conducting operations off the coast of Somalia on Thursday evening, adding that search and rescue operations are continuing to locate them.
US Central Command said the sailors were deployed to the Fifth Fleet area of operations to support a series of missions, adding that it would not release additional information until after the missing persons were recovered.
Reuters quoted officials as saying that the United States carried out an additional strike on the Houthi forces in Yemen, yesterday, Friday, after the Joe Biden administration pledged to protect navigation in the Red Sea.
The latest strike, which an American official said targeted a radar site, came a day after facilities of the Iran-allied group were targeted by dozens of American and British strikes.
After Houthi leaders swore to respond to those attacks, US President Joe Biden said he may order more strikes if the Houthis do not stop their attacks on commercial and military ships in one of the most economically important waterways in the world.
Oil and US inflation
Brent crude oil has witnessed fluctuations since the start of the US strikes in Yemen, as it rose from the level of $77.33 per barrel in the middle of last Thursday’s trading, with the threat of strikes on this Yemeni group, to the level of $80.55 yesterday before it fell to $78.32 per barrel.
American crude oil took a similar trend, rising from $71.84 per barrel in mid-Thursday trading to $75.17, before ending last week’s trading at $72.76 per barrel.
Annual US inflation rose again last month, to 3.4%, exceeding economists’ expectations by about 0.2%.
But what is striking about the consumer price index issued last Thursday is that the energy index led the rises, increasing 0.4% on a monthly basis, while the food index rose 0.3%.
Annual US inflation declined last November to 3.1% from 3.2% in the previous October.
US stock indices responded to the data by losing most of their gains on Thursday, with an almost incidental performance yesterday, the last trading of the week, amid doubts about the possibility of reducing the interest rates adopted by the US Federal Reserve to stop price increases.
The market expects the US interest rate to remain at its current level in the range of 525-550 points, at a rate of 94.8%, according to the performance of “Fed Watch”.
It is noteworthy that raising the American interest rate means more pressure on American economic growth, as it raises the cost of borrowing and obtaining financing from banks, thus curbing the renewal of economic activities. It also pushes emerging markets to chase interest rates in the largest economy in the world so as not to lose financing from abroad, which US debt instruments are preferred with a strong economy and high yields.
Consequences of war
Financial markets expert Jad Hariri told Al Jazeera Net that the disturbances in the southern Red Sea lead to an increase in shipping prices, which ultimately reflects on consumer prices (inflation), which the US Federal Reserve seeks to curb, which may not allow room for lowering interest rates.
He adds that the markets were expecting a 1.5% reduction in US interest rates, but the US Central Bank indicates a 0.75% reduction.
Regarding the repercussions of the unrest on the American economy, Hariri says that this impact – if it occurs – will not change investors’ perception of it as the strongest economy in the world, given the weak growth of other economies in the world.
Hariri said that gold is considered a safe haven in the event of disturbances in the Red Sea, and is considered a factor for the continued rise in its prices, but on the other hand, it may be negatively affected if the United States maintains its monetary policies to confront high inflation in the last month.
In general, Hariri expects the market to take into account the impact of US monetary policy indicators (expected to be negative on gold) more than geopolitical disturbances (positive on the precious metal).
Regarding oil prices, Hariri sees the impact of the turmoil as a positive factor influencing oil prices. If the Bab al-Mandab Strait is closed, this will be added to the recent voluntary reduction in production approved by the OPEC Plus alliance, bringing a barrel of Brent crude to about $100 per barrel, and American crude to $98. .
If the unrest in the southern Red Sea fades, the markets will return to focusing on OPEC Plus production cuts, along with demand levels and countries’ economic growth indicators.
