Israel-Hamas war pushes oil and gold prices up: Impact on India

The ongoing conflict between Israel and Hamas has sent shockwaves through the world. What started as a surprise attack has quickly escalated into a multifaceted crisis.

In the wake of this, nations grapple with the complexities of trade, commodity prices, and economic stability.

What are the immediate economic ramifications of the conflict and the potential impact on the Indian economy?

Impact on the Indian Economy

According to the Embassy of India in Israel, trade between the two countries stood at $10.1 billion in the financial year 2022-23. That fiscal year, Indian merchandise exports to Israel were valued at $7.89 billion and Israeli exports to India were $2.13 billion. Israel is the third-largest Asian trade partner of India and 10th overall. Israel is one of India's top military equipment suppliers. The war between Israel and Palestine, especially a prolonged one, could significantly impact the trade agreement it holds with India.

The Indian rupee has already weakened against the US dollar due to rising geopolitical tensions. Experts believe that if the conflict continues to escalate, it could lead to a further weakening of the Indian rupee.

In case the war intensifies, India has to tread cautiously as it is part of the India-Middle East-Europe economic corridor.

Also Watch: Intelligence lapse led to massive Hamas offensive on Israel?

Impact on Global Oil Prices

Although Israel and Palestine are not major oil players, the violent conflict is happening in a broader key oil-producing region. Crude has already spiked as much as five per cent on fears that the Israel-Hamas war may escalate even further.

However, as crude traders quoted by CNBC said they don’t expect a massive price surge as there’s no immediate threat to supply. They also added that broader repercussions of the Israel-Hamas conflict are expected to remain relatively limited. As of this morning, oil prices surged over $3 a barrel in early Asian trade due to the conflict

Effect on Gold Prices

Gold prices have been rising due to the escalating conflict. The precious metal is considered a safe-haven asset during times of geopolitical uncertainty. The price of gold has risen by more than 2% since the start of the conflict. According to experts, if the conflict continues to escalate, gold prices could rise even further.

Impact on Maritime Routes

The ongoing conflict between Israel and Hamas has also impacted import-export through sea routes. The conflict has led to the closure of ports in Israel, which has disrupted maritime trade in the region. The ports of Ashdod and Haifa have been closed due to security concerns. This has led to a delay in shipments and a rise in shipping costs. The closure of ports is expected to have a significant impact on global supply chains, which could lead to a rise in prices of goods across various sectors. The impact of the conflict on maritime trade is expected to be felt across various regions, including Asia, Europe, and North America.

Also Watch: Air India cancels Tel Aviv flights amid escalating tensions in Israel: Report

If the conflict continues to escalate, it could lead to further economic instability across the globe.