Middle East Conflict Stirs Inflation
(MENAFN) Rising instability in the Middle East is intensifying concerns over both economic inflation and a possible downturn, as hostilities between Israel and Iran escalate following the outbreak of violence last Friday.
On June 13, Israel carried out wide-ranging assaults on Iran, targeting military command, "nuclear facilities," and several urban areas. In retaliation, Iran launched 370 "ballistic missiles," marking a significant escalation in the standoff.
Financial markets are grappling with unpredictability regarding the duration of the confrontation and its broader impact on global financial instruments and commodity prices.
One major issue is the potential shutdown of the Strait of Hormuz — a crucial maritime passageway responsible for transporting nearly one-third of the globe’s oil and liquefied natural gas (LNG).
Any disturbance in this corridor could unleash considerable supply chain disruptions, especially in sectors such as industrial production.
A surge in energy prices, combined with the ongoing uncertainty, may stoke inflationary forces while exerting negative effects on essential economic metrics.
The hostilities between Israel and Iran have driven Brent crude oil prices up by 11.1 percent, reaching USD73.7 per barrel — the most significant weekly increase since October 3, 2022.
Meanwhile, natural gas costs in Europe rose at the beginning of the week.
At the Dutch virtual trading platform TTF, gas prices for July delivery climbed by 3.2 percent, reaching 39.1 euros (USD45.34) per megawatt-hour.
Joachim Nagel, head of Germany’s "Bundesbank," noted that although the immediate impact of the Israel-Iran crisis on oil pricing is considerable, the longer-term effects remain hard to predict.
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