By François Rimeu, Senior Strategist, La Française AM
How the conflict between Israel and Palestine will unfold is extremely uncertain today. We do not claim to know the outcome, but have identified a certain number of potential consequences that we will evoke briefly below :
- The situation is explosive, and it arises in a world already plagued by numerous imbalances: climatic, migratory, diplomatic between China and the United States, linked to the conflict between Russia and Ukraine, etc. All of these imbalances militate in favor of financial markets volatility during the months ahead.
- The conflict is unlikely to have a direct impact on oil production, but it could have an indirect impact :
- Hopes that relations between Israel and Saudi Arabia would normalize in the short term have likely disappeared. The United States has been working on this for months, which could have led to an increase in oil production by Saudi Arabia early next year. This is unlikely to happen.
- The United States has reduced the level of sanctions applied to Iran over the past year, which has led to an increase in Iranian oil production. This increase is estimated at 700,000 barrels/day (source: Bloomberg). Given the ties between Iran and Hamas, it is possible that US sanctions will resume, resulting in a drop in oil exports from Tehran.
- Discussions have been difficult in recent months between US Republicans and Democrats over support for Ukraine: they are likely to be even more so if the US government has to "arbitrate" between support for Israel and Ukraine.
Fortunately, we have not reached this level of escalation yet, but it is always worth remembering that a war is by its very nature “inflationary”, and more often than not, results in higher commodity prices. The weekend's events could therefore make the mission of central banks even more difficult.
This commentary is provided for informational and educational purposes only. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.