Market Morsel
The world appears to be going a bit mad at the minute.
It was dreadful to see the video footage coming out of Israel over the weekend and to see the continuing boost in the death toll. Whilst Hamas struck the very first blow, it promises that the Palestinian individuals will be the ones to bear the impact of retaliation.
Talking about the effect of these abominable matters on markets can be a bit morbid. The truth is that occasions with horrible human repercussions do shape markets every day, from floods in India, and dry spell in Africa to the war in Ukraine.
So, what effect does the dispute in Israel have on grain markets? Really little bit, at present. The present dispute with today individuals (Hamas/Israel) will likely have little influence on the marketplace.
The effect will be if there is contagion to the broader area. There are accusations that Iran has actually been accountable for helping in the preparation and financing of this weekend’s attack.
If the dispute grew to consist of neighbours such Lebanon and Iran, then we might see the circulation of petroleum being stymied.
Iran belongs to OPEC and produces around 3.5 to 4m barrels of petroleum day-to-day out of around 90m barrels worldwide. This equests to simply under 5% of worldwide petroleum production. This does not take into consideration the Persian Gulf as a vital chokepoint for other countries’ oil exports– accounting for 20% of worldwide petroleum and one-third of its LNG.
So if, which is a huge if, the dispute expands, then we might see an effect on energy markets. We have actually talked about in excellent length the effect of energy markets on farming products, however here is a summary:
- Wheat, corn and oilseeds have a strong relationship with petroleum. This is because of the interchangeability to produce biofuels.
- The primary active ingredient for nitrogen-based fertilizer (Urea) is gas. When the gas cost increases, so does the urea cost.