By Harry Mottram: As a new war engulfs Israel, Gaza and potentially neighbouring nations the economic effect is to send oil prices surging, air lines pulling flights in the region and arms manufacturers’ shares rising. War is as the saying goes, hugely profitable, its just the human cost is appalling. And so it seems to be the case as following a bloody incursion into Israel by Hamas forces from Gaza a full scale war has broken out around the tiny Palestinian enclave.
Whatever the causes the conflict is having a dramatic effect on business and potentially the world’s economy as oil prices rise sharply fuelling inflation across the globe. The cost of a barrel of Brent crude, the benchmark for oil prices, was up 3% after fears circulated that Iran could be drawn into the war. Sky News reported: “Arms companies saw the value of their shares rise on Monday. UK defence firm BAE Systems was one of the top risers in the FTSE 100 list of the most valuable companies on the London Stock Exchange. It’s share price rose 4.5% to 1018.5p a share.”
Once again it is airlines that have been hit hard with flights cancelled across the region in the fear of planes filled with passengers becoming targets. There is also a fear that terrorist attacks may happen as Hamas or other groups seek revenge for IDF’s attacks on Gaza. The knock-on effect is on tourism – not just in Israel but in nearby nations – Egypt has seen tourists attacked already – while around the world there is nervousness over potential terrorist attacks. To give a flavour Sky News reported that airlines stock value fell as a result of the violence and the higher oil price. The parent company of British Airways, Aer Lingus and Vueling, among others, saw the value of its shares fall up to 5.8% on Monday, while Ryanair’s share price dropped 3.6%.
Ian Carrotte of ICSM – the business group dedicated to preventing bad debt – said the rise in oil prices was a major concern. He said: “Economies are still built on oil – from air freight and shipping, to complex logistics to the white van man making sure the shops are stocked. A hike in fuel costs means everything that is shipped from your Amazon delivery to the timber for building homes will be more expensive. Inflation is still far higher than the Bank of England’s 2% target – so this is the last thing the British economy wants.”
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