However, as about one third of the world's oil supply originates from this region and as there is still no serious efforts from the Western big powers to end the war, the risk of an oil shock remains. This is more so because they (Western powers) are too biased to one side in the war, Israel, to be specific, to act as a potential peace broker. All this can create market uncertainties driven by the fear of any disruption to the oil supply. It is showing up by way of the risk premiums in the oil markets. This is because oil is traded in the futures before any risk of volatility emerges. Speculators expect to use such possibilities to increase their profits. Similarly, businesses dealing in oil try to hedge their bets against any turmoil in the energy market in the future. So, how the energy market will behave depends a lot on the role of the big powers in the conflict and its (the conflict's) potential to suck the entire region into its maw. The consequential rise in energy price will force central banks of different economies to increase interest rates to tame inflation.
In this connection, a recent poll conducted by the international news agency, Reuters, among more than 500 economists has come up with findings that are hardly optimistic for the world economy. Going by the views expressed by the economists so interviewed, the global economic growth will decline and inflation rates will rise in 48 economies of the world.
Meanwhile, the European Central Bank's president, Christine Lagarde has said that even having a discussion on (interest) cut is totally, totally premature. Most economists, according to the survey, believe that the US Federal Reserve is less likely to go for an interest rate cut by mid-year. Many other leading central banks of the world including those of New Zealand, Australia, Indonesia, India and even Japan, for instance, are not interested in lowering interest rates any time soon.
In fact, the recessionary trend in the major global economies still persists. Since energy price is the prime mover of modern-day economies across the globe, the optimism that was being evinced recently by major economies had to do with the relative stability of the energy market. Though some are willing to downplay the possible impact of Hamas-Israel on the global energy market, the reality could be quite different.
In that case, the developing economies like Bangladesh should rather be circumspect in their energy policies with an eye to the situation evolving in the Middle East centring around the war in Gaza.
Bangladesh's economy, at the moment, is precariously positioned with the inflation rate reaching 9.92 per cent and food inflation at 12.54 per cent last August according the Bangladesh Bureau of Statistics. Worse yet, the foreign exchange reserve is constantly depleting (on 25 October, 2023 it was US$20.89 billion). Against this backdrop, any further rise in the prices of Middle Eastern oil and natural gas, on which the country is dependent, can be disastrous for the economy.
The consequences of any war is damaging not only for the economies that are involved in it (the war), but also other nations maintaining business transactions with them. In an interconnected world, the entire globe is impacted by any war anywhere. Bangladesh needs to adopt appropriate policies to tide over any emerging crisis attributable to the ongoing war in the Middle East.
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