Prof. Dr. Explaining that South Korea, China, India and Japan, which can be called the world's factories, receive 80 percent of the energy flowing through the Strait of Hormuz, Erhan Aslanoğlu, a lecturer in economics at Istanbul Bilgi University, said, “Therefore, these countries seem to be candidates to experience and cause problems on the supply side, so that they cannot provide energy supply.” he said.
The Middle East, the heart of global energy supply, is experiencing one of the toughest tests in its history with the war environment that began with the US and Israeli attacks on Iran on February 28 and was the result of Iranian retaliation.
The region has also become the center of a complex tremor in the veins of the global economy.
The total value of world stock exchanges, whose total value was $157.5 trillion in the first month of the war, fell to $143.5 trillion on March 30.
This loss of around $14 trillion showed not only the loss of investor confidence, but also how far-reaching the economic impact of the war was.
The most critical dimension of the crisis emerged in the energy supply. Serious disruptions and increased security risks in the passage of oil, LNG and commercial vessels in the Strait of Hormuz, which supplies about 20 percent of the world's daily oil needs, have directly disrupted the global energy flow.
While the developments pushed the barrel price of Brent oil to over $100, the tightening supply also increased price pressure on other oil products, particularly aviation fuel.
Concerns about product supply were not the only factor determining pricing in the markets. Rising energy costs, rising freight costs and rising insurance costs due to the threat of war are putting pressure on the entire production chain, especially agriculture.
These cost increases, which spread to all stages of production, triggered a new wave of costs in the world economy and brought new points in the price system to the agenda.
“In real off-peak pricing, oil and related products will impact transportation costs.”
Prof. Dr. Erhan Aslanoğlu, a lecturer in economics at Istanbul Bilgi University, said in his statement that the risk factor has come into play in terms of prices reflecting increasing geopolitical tensions at the global level, but the impact is mainly seen in financial assets for now.
Aslanoğlu said:
“Of course, it is not wrong to say that a risk premium has played a role in pricing in the world today. However, the risk premium is a situation that we can observe primarily in the parameters of the financial markets. For example, oil prices can contain a risk premium of 20 to 30 dollars even if the war ends. The price of gold had recorded a similar increase before February 28. The same increase does not always have to take place in the expectation that similar situations will arise again. Such an increase may not be observed, “Even if the war ends, this may not be the case in the stock market. Real prices for oil and related products and transportation will also affect costs.”
Stating that the main determining factor for product prices remains the balance between supply and demand, Aslanoğlu explained that there has been a shock on the supply side in particular.
Recalling that the Strait of Hormuz, through which 20 percent of the world's oil and natural gas flows, is likely to be closed, Aslanoğlu said:
“There is a closure of a region through which nitrogen-based fertilizers, 10 and 15 percent of the world's aluminum and 25 to 30 percent of fertilizer are transported. Above all, Hark: “In the event of a possible attack on the island or the start of a land operation or a stop or interruption of Iran's energy supplies, the pressure on prices will largely come from supply-side shocks.” In summary, there is a risk premium, but I think this is more evident in the financial market parameters.”
“The drop in demand caused by the rise in oil prices will do more harm than good.”
Prof. Dr. Stating that the issue of closing the Strait of Hormuz and imposing a toll is controversial in terms of sustainability, Aslanoğlu emphasized that the prices resulting from this situation are of a temporary nature.
Aslanoğlu said: “Although it seems that oil producing and energy selling countries may benefit in the short term from an increase in oil prices to $200 to $300, they also know that the drop in demand that such price levels bring will do them more harm than good. Therefore, such prices or tolls may be temporary in nature.” he said.
Stating that logistics and insurance companies can achieve short-term benefits due to the risk premiums in this process, Aslanoğlu emphasized that insurance companies may also face serious difficulties in an environment where risks arise.
Stating that if energy prices in the world continue to remain high, even if there is a global recovery, Aslanoğlu may cause both food and commodity prices to remain high, and continued his words as follows:
“This situation suggests that some commodity-producing countries in Latin America and Africa, and to some extent the countries of the Middle East, could differentiate themselves more positively in this process. However, since the countries of the Middle East are suffering serious damage, it can be said that they incur more costs than the revenues they will generate. Latin American countries stand out as commodity producers in this process. In general, I believe that energy and food producing countries could remain in a more advantageous position. In this context The losing side could be larger among non-commodity producers and commodity-dependent importing countries.” appears.”
On the other hand, Aslanoğlu pointed out that in this environment where risk and security premiums are at the forefront, the scale factor is also crucial for companies, explaining that large companies offer advantages in terms of risk management and liquidity.
Aslanoğlu explained that such crises generally make large companies more advantageous in terms of liquidity and risk management experience, and that small companies face greater difficulties during such times due to disruptions in liquidity flow.
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