Rising incidents of geopolitical conflicts around the world - the latest being the Hamas-Israel war - is contributing to higher oil prices and keeping a lid on investment performance.
As Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, explained, OPEC said it expected global crude stockpiles to fall by three million barrels per day this quarter, barring further supply disruptions from the Israel-Hamas war.
Lund-Yates said: “General supply concerns have pushed the price of a barrel of brent crude up 1.3 per cent in the last week to around $87 a barrel, and that’s quickly becoming another headache for policymakers. There’s also hopes for strong global demand.
“However, the head of the International Monetary Fund has warned that the current conflict could become a headwind for economies and is being monitored closely.
“Geopolitical situations such as these can change direction at short notice and have the ability to rattle markets and energy prices in a big way. Investors are wary of the unknown so this is keeping a lid on market performance until a clearer trajectory towards peace is found.”
During her speech on the global policy agenda, at the annual meetings of the International Monetary Fund and the World Bank Group on Thursday, Kristalina Georgieva (pictured), IMF’s managing director said the agency was closely monitoring how the situation in Israel was evolving and how it was affecting especially oil markets.
Georgieva said: “It is too early to say. We have seen some up and down of oil prices. We have seen some reaction on markets. As I said, we will be closely monitoring this.
“Very clearly this is a new cloud on not the sunniest horizon for the world economy, a new cloud darkening this horizon that is not needed.”
Georgieva went on to add that “we are experiencing severe shocks that are now becoming the new normal for a world that is weakened by weak growth and economic fragmentation”.
In its latest World Economic Outlook, the IMF projects global growth in positive territory at 3 per cent this year and 2.9 per cent next year.
Georgieva added: “We expect growth to remain low over the medium term, and we are faced with deepening divergence in economic fortunes. Successive shocks since 2020 have pushed global output down by $3.6trn as of this year.”
