‘Worst’ still ahead as oil price swings darken global trade outlook

{"text":[[{"start":7.9,"text":"Growth in the global trade of goods will fall significantly by the end of next year if the Middle East conflict continues to rupture oil markets, according to a new analysis."}],[{"start":18.450000000000003,"text":"The study, based on modelling of previous price shocks such as the Covid-19 pandemic and the 2008 commodity crash, indicates that global trade flows will become less resilient if the conflict drags on."}],[{"start":31.250000000000004,"text":"Independent monitoring body Global Trade Alert found that persistent oil price fluctuations would lead to global trade growth shrinking by 1.75 per cent by the end of next year, a significant reduction on prewar expectations. "}],[{"start":47.1,"text":"Simon Evenett, GTA’s founder and trade expert at IMD Business School in Lausanne, Switzerland, said the modelling suggested that world merchandise trade flows might not prove as resilient as early indicators suggest."}],[{"start":60.7,"text":"“We find that a sustained rise in fuel price volatility slows world trade growth and effects take up to 19 months to materialise. The worst may be ahead of us,” he added."}],[{"start":73.60000000000001,"text":"The worst-case scenarios implied a serious dent in the World Trade Organization’s March forecast that global goods trade would grow by 1.9 per cent in 2026 before picking up to 2.6 per cent in 2027. It had estimated that sustained high oil prices could shave 0.5 percentage points of growth in 2026."}],[{"start":null,"text":"

"}],[{"start":97.65,"text":"Since the war began, shipping container rates on key routes between Asia and European and North American markets remain largely unchanged from a year ago on the back of weak demand, according to data from supply chain analysts Drewry."}],[{"start":110.95,"text":"However, Evenett said modelling showed that the effects of oil price volatility took months to feed through as shipping contracts were renegotiated, inventories run down and consumer confidence in key markets waned."}],[{"start":124.2,"text":"Notably, the analysis found that fluctuations in prices were far more damaging to trade than consistently higher prices which increased revenues for commodity exporters, balancing out any negative impacts on manufacturing exporters such as Japan or the Eurozone."}],[{"start":141.05,"text":"“A world in which oil is expensive but stable is less damaging to trade than a world in which oil prices swing unpredictably. What weakens goods trade is the volatility of oil prices, not the price level itself,” the analysis found."}],[{"start":156.25,"text":"The GTA modelling estimated the impact of a 25 per cent rise in fuel price volatility over 12 months — roughly comparable to the energy crisis that followed Russia’s full-scale invasion of Ukraine — and a doubling of volatility, consistent with the peak of the 2008 commodity crash. "}],[{"start":null,"text":""}],[{"start":175.3,"text":"Oil prices have gyrated since the US and Israel launched strikes against Iran on February 28, leading to Tehran’s decision to blockade the Strait of Hormuz, choking off around 20 per cent of world oil supplies. The US has responded with its own blockade of shipping heading to and from Iranian ports."}],[{"start":194.15,"text":"The price of Brent crude jumped from around $70 a barrel at the start of the conflict to a peak at nearly $120, before falling back to $86 on the news of a diplomatic breakthrough. It then rose again to more than $126 last week as talks to reopen the strait became deadlocked. "}],[{"start":214.3,"text":"In the worst-case scenario, where volatility doubles, Africa and the Middle East saw by far the biggest hit to trade of more than 8 percentage points, with China’s hit of nearly 3 percentage points nearly three times that of the US. "}],[{"start":229.45000000000002,"text":"The analysis showed that some regions would be more severely impacted than others. Emerging Asia and Latin America showed no discernible effects, while China, Japan, the Eurozone and the US experienced a drag on trade growth alongside Africa and the Middle East."}],[{"start":245.70000000000002,"text":"Evenett added that current oil price volatility is nearly 60 per cent higher than prewar levels, midway between the two scenarios, meaning trade growth would dip by 1.1 percentage points by the end of 2027 on current trajectories."}],[{"start":260.5,"text":"Data visualisation by Alan Smith. Additional reporting by Laurence Fletcher in London. "}],[{"start":273.75,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1778050273_7346.mp3"}