Geopolitical Conflicts Keep on Imposing Threats to Global Forecasts

Nevertheless, geopolitical threats keep on escalating, and with international oil stockpiles falling shortly after the rises noted in 2016-2017 period, this will foster the maintenance of a ground beneath prices. There are various eminent geopolitical threats mentioned in the EIU’s (Economist Intelligence Unit) key forecast report.

Examining one side, if Russian powers or arms were to be impaired following a US airstrike intervention in Syria, this could trigger an upfront military conflict between the two nations. If the case becomes worse, there is the threat of crippling economic embargoes could be reinforced to the Russian energy field, which could trigger a rise of oil prices. Furthermore, a worsening of the conflicts between Iran and Saudi Arabia, arguably as an outcome of their participation in the proxy turmoil in Syria, or more specifically, the turmoil in Yemen, could also upset global energy stockpiles and increase prices.

Worries over oil-field aggression in Nigeria, the shaky political stability in Libya and conflict between Kurdish divisionists and Iraq, could also pose opposing threats, which imply that the geopolitical price principal will not subside. With international oil stockpiles falling to the former 5-year average numbers, outbreaks in geopolitical conflicts would lead to more price instability compared to previous years.

Hard Commodities Market
Even though IRM (Industrial Raw Material) prices will remain unstable, in 2018, EIU anticipates to experiencing another year of orchestrated development of all 6 prime metals that EIU examine on the LME (London Metal Exchange) event. These price rises will be triggered partially by ongoing robust demand growth in developing Asia (despite a more stable rate than last year, as China acts to restrain heightened industrial power) and periodic supply shortage. Mr. Trump’s current declaration of blanket charges on imports of steel by 25% and aluminum by 10%, have raised the prospect of market instability. However, even though some of the trading allies of the U.S. and reportedly China will respond, EIU doesn’t anticipate these policies to expand to an extent that they notably upset International prices of metals.

In general, EIU anticipates import taxes to trigger a deviation of prices in the U.S. (where supply deficiencies and elevated import costs cause a slight spike of the prices) and everywhere else, as additional supplies, which were aimed to reach U.S. territories, would force prices to slightly fall. EIU anticipates the general IRM price mark to rise for another time in 2018, reportedly by 7.5% before falling lightly by approx. 1.1% in 2019 as demand development for metals is under control, after 2 years of robust development.

Soft Commodities Market
EIU anticipates food and drink prices to move somewhat slowly within the forecasted timeline, mirroring controlled demand and sky-high inventories after a number of bumper productions of grains in the previous 2016/2017 period. Worries regarding crop damages connected to a La Nina weather occasion have subsided and EIU does not anticipate an agricultural price surprise.

Nevertheless, EIU currently forecasts that food, feedstuffs and beverages price indicator to rise by approx. 4.3% (as opposed to the previous 2.9%) in 2018, partially due to worries about a rise in soybean prices, as China warns about placing a 25% tax on imports from the U.S. amid the wide continuing trade conflict between the two nations. EIU anticipates FFB prices to spike more by 2.4% in the upcoming year, as international supplies start to limit slightly, despite prices falling below the historical average. In the medium term, EIU anticipates increasing incomes and population together with a fast urbanization and shifting diet patterns, to foster ongoing modest expansion in Food, Feedstuff and Beverage Prices.