Airstrikes in Yemen likely have limited impact on commodities

By Tuba Ongun and Gokhan Ergocun

ISTANBUL (AA) - Economists expect no major impact on commodities or financial markets from the joint airstrikes on Yemen that the US and UK launched this week.

On Thursday, the US and UK launched joint strikes on military targets associated with Yemen’s Iranian-backed Houthi rebel group, which has carried out some two dozen attacks in the Red Sea since Nov. 19.

Attacks on commercial vessels in the Red Sea forced logistics firms to use alternative routes, raising shipping rates and delaying deliveries.

Speaking to Anadolu, Sant Manukyan, head of the Investment International Markets Department with Is Bank, Türkiye's biggest private lender, said that the impact of this tension on financial markets will be limited as long as Iran doesn’t get directly involved, which is unlikely.

"Iran will not enter the picture so as not to confront them directly," Manukyan stressed.

He added that if the tension triggers an oil crisis due to a possible supply cut by Iran, OPEC's largest oil producer Saudi Arabia will likely boost production to limit price rises.

As the region was already closed to seaborne trade traffic, the incident in Yemen will not create an additional shock, Manukyan said, adding: "There were a lot of short positions in oil. Investors would be uncomfortable [with the situation] and would close them [short positions]. This won't prompt a new rally in oil prices."

International benchmark crude Brent traded above $80 per barrel on Friday, up 4% on a daily basis.

- Houthi attacks on ships impact commodities more than Thursday’s attacks on Yemen

Following Thursday’s attacks on Yemen, oil prices rose slightly, noted Zafer Ergezer, an expert in commodity markets, adding: "This is expected because Yemen and the Red Sea constitute an important part of the world trade."

He stressed that the region is right on the transit route, and so attacks prevent the passage of ships.

The number of ships passing through the Suez Canal has fallen, and freight prices have shot up, he said.

For this reason, world trade prices have gone up, and this also pushes up oil prices, he explained.

On the other hand, there is a demand pressure on oil prices due to a global slowdown, especially in China, he noted.

"In fact, if there’s not too much conflict in the short term, the risks in trade and commodity and freight prices will fall after a short period of time," he said.

Because investors see the attacks on Yemen as a mechanism to protect trade routes, the impact of those attacks will be softer than the Houthis’ attacks on ships, he predicted.

He also said the number of ships using alternative routes may continue for a while because of conflicts and this could push up the costs and duration of transport, but it will be limited.

"We can expect a higher (price) increase in industrial metals, the biggest impact can be seen on iron and steel because most of the ships passing through there are related to iron and steel," he added.

Generally speaking, the impact of the attacks on Yemen will be less than that of the Houthi attacks on shipping lanes.

- Upward impact on commodity prices

The American and British forces striking the Houthis should be read as an indication that things have grown more serious in the region, especially for the oil market, said strategist Ozgur Hatipoglu.

He noted, however, that the incident has an impact not only on oil but also on the prices of all kinds of commodities traded and transported by ships.

Disruptions in the supply chain will necessarily have an upward impact on commodity prices, he stressed.

"On the other hand, according to the Kiel Institute's World Economic Report, inflation in Europe isn’t expected to rise due to this supply chain disruption," he said.

Hatipoglu underlined, however, that charges for standard cargoes on ships transporting goods between China and Northern Europe have risen from $1,500 per container in November to $4,000 now.

In this case, prices for the transportation of these goods to the end user will inevitably increase. As a matter of fact, a significant part of the cargo transport in the Red Sea has shifted to the North Sea, but this has its own challenges, he stressed.

He said considering that stocks have started to fall in recent weeks, West Texas Intermediate oil may rise to the $78-80 per barrel range.

Gold, which is considered risk protection, is now more related to the US dollar index and interest rates, Hatipoglu stressed.

He added that as the risk of war remains regional, gold should not be expected to benefit from this factor and US bond interest figures should be followed more.