The Middle East: a welcome pause but unresolved issues will create difficulties
It has been a torrid few months, what with war in the Middle East, soaring oil prices, the US hurling more tariff threats against pretty much every other country in the world, and continued question marks over China’s economy. But there have also been hopeful developments. The US and Iran have agreed on a deal that aims to end the fighting in that region. This should help to restart the flow of oil and bring energy costs down. Presidents Xi and Trump have agreed on a framework to reduce the risk of outright confrontation between the two big powers. And the listing of SpaceX has minted the world’s first trillionaire as well as thousands of new millionaires. It opens the way for many more such blockbuster listings and massive wealth creation. Stock markets have gone on to new highs as a result.
It would be tempting to say that we are over the worst but our view remains a cautious one. Once the relief rallies in financial markets are over and the dust settles, the reality is likely to be somewhat worse than the markets seem to expect. With the war’s end, the trends that were underway in the world economy before that war will re-appear. Some of these are positive while others are likely to be negative: the overall impact will be less than benign.
