The economist explains how the situation in the Middle East affects the Finnish consumer

What kind economic effects are expected when the new week starts on Monday after the attacks in the Middle East?

Over the weekend, the US and Israel’s attack on Iran shook the world.

OP Pohjola’s chief strategist Lippo Suominen according to the situation in the Middle East above all affects the price of oil and increases uncertainty.

However, Suominen says that the economic effects will not necessarily be big if the situation is over soon. A prolongation of the situation with weekly and monthly trading would also confuse the global economy.

For Finns, the effects are most visible in travel

Finnish according to Finns, the effects are most visible in tourism and flying. He brings up the situation in Dubaiwhich is also a popular tourist destination for Finns. Airlines, on the other hand, have to look for new flight routes.

“Russian airspace is closed and now it is not possible to fly further south either. So I don’t know where the airlines are hooking up,” says Suominen.

“If a large number of flights are cancelled, there may be a strong demand for a few flights. At least the prices of the flights will not decrease.”

Airlines are also very dependent on the price of oil.

According to Suominen, direct economic effects from the Middle East are ultimately quite few.

Prices rise at the gas pump

Attack affect the price of oil because numerous oil tanker owners and oil companies have suspended the transportation of crude oil, fuel and liquefied natural gas Hormuzinsalmen through.

It is the world’s most important oil and natural gas transportation route, connecting the region’s major oil-producing countries Saudi Arabia, Iran, Iraq and the United Arab Emirates to the Gulf of Oman and through it to the Arabian Sea.

According to Suominen, an increase of five or ten dollars per barrel in the price of oil is not yet a big deal. More dramatic effects would only occur with an increase of tens of dollars. According to him, that would require a view that the situation is not improving.

“The price of oil would have to double for a recession to occur, because otherwise the economic situation in the world is quite good.”

OPEC+ size announced on Sunday that they will increase oil production, reports news agency AFP. Among them are Saudi Arabia, several Persian Gulf states and Russia.

Suominen points out that the world economy is no longer so dependent on oil, because there are other forms of energy alongside it.

Suominen says that, according to estimates, the price of fuel at a Finnish gas pump could rise by 20-30 cents at worst. He himself believes in a more cautious increase of 5-10 cents.

“When it’s time to refuel, prices will fluctuate even without Iran. If this continues until next week, everyone will surely think about whether they should refuel just to be safe.”

Suominen says that sellers are also thinking about the price at which they will replenish their gas stocks.

He cannot say how quickly the change will be seen at gas stations.

“If I were a gas station owner, I would immediately start raising prices.”

Stock exchange rates have survived a similar situation before

Lippo Suominen predicts that the situation will affect the stock exchange rates negatively, but there is no big collapse expected on Monday.

“We’ll probably go with red for reasons of caution, but for now it’s hard to see what big effects there would be, apart from oil. We’ll be watching with excitement and caution.”

The stock markets of Saudi Arabia and Egypt fell on Sunday as a result of the situation in Iran, reports the news agency Bloomberg.

Suominen reminds that recently, for example, in the case of Gaza and Venezuela, big economic consequences were feared, but the effects on the global economy have been minor.

“It was certainly thought in Venezuela and other Trump matters that things could go badly. Risks and the economy, certainly calculated for the USA, are an important matter for Trump. If there was a big risk, Trump would not have gone into this. From a non-economic point of view, the matter is more significant.”

His message is that you shouldn’t worry too much about investments.

“There have been enough risks and worries in the past, and time after time we have been able to move forward nicely.”

If Trump clears quickly, the uncertainty may decrease

Finnish at the moment, it seems that the attack has proceeded according to Trump’s playbook. The fact that the United States and Israel killed the supreme leader of Iran, the Ayatollah, speaks for itself Ali Khamenein and other senior Iranian leadership.

If the United States quickly completes the operation and succeeds in withdrawing from Iran, it could contribute to reducing geopolitical uncertainty, which, according to Suominen, could have a positive effect on the economy.

“In the best case, we quickly jump forward and the world’s eyes are elsewhere. This is not terrible from an economic point of view, if we don’t get into really bad scenarios.”

Of course, there are many questions in the air. Will there be a civil war in Iran? Will the attack lead to terrorist attacks?

A prolongation of the situation would lead to long-term economic effects at worst.