3 hours ago
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Iran’s attack on Israel will most likely affect energy prices, which would then have an impact on food prices, according to Dr Peter Baur, an associate professor at the School of Economics at the University of Johannesburg, who said if the situation was to escalate, there could be an impact in oil prices as well.
"If the war continues, we're most likely going to see an increase in energy prices, which is going to impact on food price production because food is produced and transported, and you are going to see an increase in that," he said yesterday.
Baur said this conflict will affect SA indirectly through energy prices because of the market uncertainty. "It is more about the uncertainty component for markets and investors and uncertainty is critical," he said.
"Basically, the Middle East regions are still very important in terms of energy producers and oil producers. If the situation is to escalate, we could see an impact on oil prices and that is our first major concern."
The BBC reports that the Iranian state media cited the Islamic Revolution Guard Corps as having said that the missile barrage launched on Israel was retaliation for what it called the "violation of Iran’s sovereignty and the martyrdom” of Hamas political leader Ismail Haniyeh.
Haniyeh was killed by an explosion in Tehran in July that Iranian officials blamed on Israel. However, Israeli officials allegedly did not claim to have been behind that attack.
International Law expert from Wits University, Patrick Lukusa Kadima, said oil prices may surge due to the conflict and African countries that import oil would "certainly be in a tough place" due to currency depreciation and depleted forex reserves".
"The prices will surge because it is more of a supply and demand, and production issue, that is why oil prices jerk upwards during a conflict."
Kadima said the conflict would also bring a surge in the gold processing, something that will be an advantage for SA. However, it would negatively affect monetary policy and inflation. "The impacts of a full drawn-out war will also affect economic growth for the country," he said.
Kadima described the situation as dire, saying there was a need for de-escalation. "A fully blown-out conflict will have serious repercussions for Africa and certainly the world. Conflicts like the one we are witnessing now tend to force civilians to flee from their home countries and find refuge in other countries, and I doubt that Africa will be immune from the forced migration that will emerge from the conflict," he said.
"This conflict will certainly have strong consequences for North Africa, given its location. On the economic front, a fully drawn-out war in the Middle East region will likely affect African countries in various ways as we are not shielded from the impacts of such a war. That's why it is in the best interest, not only for Africans but the world generally, to make sure de-escalation happens quickly."
According to Baur, with such conflicts, investment would probably flow more towards the most stable economy and emerging economies which are considered more viable places to invest. "...and SA is part of the emerging economies. We are quite far removed from much of the conflict so that is going to benefit us," he said.
He added that the gold price increase might benefit SA because it makes it feasible for the country to produce. "So, we might see an increase in gold production which is job production. When we are talking SA right now, the key challenge are market uncertainty because investors start to immediately look for security, nobody wants a win-or-lose event, so you are going to see market volatility increasing and we are going to see investors start running for security. You will probably see an increase in the global gold price.
"The gold prices are one of the most renowned indicators, so in October 2023 we had $1,931,5 per ounce... we are now $2,687, so in one year we have gone up almost a $1,000, that is a clear sign that the markets are uncertain because of this [conflict], so markets are showing uncertainty and volatility."
Baur also said how fast the situation escalates and how other countries respond would determine when the continent is affected economically. "From a timeline perspective, it is difficult to say. Nobody wants this to escalate. The economy is in so much trouble already."
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