Israel’s attacks on Palestine bring region’s economy to stalemate

ANKARA

Israel’s attacks on Palestine bring the region’s economy to a stalemate, as the “ongoing conflict affects oil prices, trade routes, global trade, and global inflation,” according to an economics researcher at an Ankara-based think tank.

Oguzhan Demirdogen from the Center for Middle Eastern Studies told Anadolu that the freight rates also jumped because of the upward risk in the oil prices, noting that the pressures will rise if the conflict continues.

He recalled that the Yemeni Houthis struck commercial vessels linked to Israel that pass through the Red Sea, causing shippers to reroute their vessels around the Cape of Good Hope, the southernmost point of Africa, adding 3,500 nautical miles to travel, and raising the fuel cost for the round-trip by about $1 million.

These developments influenced the freight rates to soar 40%, the researcher stressed, saying: “The average freight rate of containers approached $4,000, and in addition, with the increase in risks, insurance prices also rose. Declining container capacity due to extended travel times, rising fuel and operational costs have increased maritime transportation costs by nearly 300% in the last nine weeks, as international shipping companies reduced their shipments through the Suez Canal, which also affected the Egyptian economy.”

“The canal is an important source of foreign currency for the country as Egypt earns $30-35 million a day from Suez Canal transits, however, with the effect of these developments, Egyptian revenues lost 36% in January year-on-year,” he added.

China, a country that carries out 80% of its foreign trade by sea, was affected by these changes, as the country brought alternative land routes to the agenda against foreign demand shocks, Demirdogen noted.

⁠New risk emerges in Europe

The researcher also said international investors are now reassessing their strategies about the region, as they are concerned about the ongoing instability.

Noting that the liquefied natural gas (LNG) shipment from Qatar to Italy’s largest terminal Adriatic LNG has been canceled, Demirdogen highlighted that a new risk has emerged for Europe, as the energy security in the region had already been shaken due to the Russia-Ukraine war.

He added that if the conflict persists, the pressures on global and regional economies will keep on rising.

* Writing by Emir Yildirim in Istanbul.