Quick Thoughts: On Everything
Iran, US, Japan, Geopolitics and Markets!
Since all of the world seems to be so active in the past two weeks, it has been a bit difficult to pin point exactly what I am wanting to write about that involves business, US and global markets. So why not cover a little of everything!
Geo Political Changes
Let us start with the recent geo-political affairs that has everyone wondering what the hell is going to happen next. To be more precise, I am talking about the strikes in Iran by the coalition forces of the US and Israel. This has obviously been built up and seemingly would result in this conflict, especially if Iran was continuing to defy the stated requirements of abandoning nuclear proliferation.
Now so far this has directly affected the prices in the regions major commodity, Oil. YMagnify | For Busy Investors highlighted this through the massive spike that occurred at the immediate onset of the events happening.
Here is her article:
This spike in oil isn’t much of a surprise when it comes to the market dynamics. In fact I would have to say since oil is so prevalent to Iran foreign trade, it is almost inevitable that the oil price would go up.
Now what’s more fascinating is the implications this has on other countries. The connections to lower energy costs for China are now likely going to be in question, especially since China is one of the main buyers of Iranian Oil.
This can effectively cut off the means for their cheap energy supply and begin to incur real costs that can affect the bottom line. China and Russia would now have to shift their strategies.
This is where things may get quite interesting.
Will things like the Russia-Ukraine war settle down because of BRICS nations losing a staple in the energy supply?
Or
Will China decide against reunification with Taiwan because of the same reason?
These questions will definitely need time to chew on it.
China, ASEAN and Japanese Relations
Now Mondayswife and Riko Kardamow recently wrote a piece that I can’t stop thinking about.
Here it is:
The deepening ties between China and ASEAN countries have created strange bed fellows and interesting trade agreements.
Add that the Japanese have found themselves more worried about an encroaching China on Taiwan and the mounting “Cold War” Vibes between the two nations, the difficulties have only intensified for ASEAN countries.
This deletes any possibility of neutrality for these countries especially since both trade partners are now wanting to be at odds with their respective interests. ASEAN may be forced to choose sides and cause for more turmoil all around.
Bottom line is Japan is willing to back Taiwan since a takeover by China would cause an “existential crisis to Japan”.
From that, strict economic sanctions have been imposed on Japan by China which affects ASEAN nations and Japanese trade. ASEAN is left in the middle to figure their own way through.
It would not be surprising that ASEAN sees this as an example of what happens to them if China doesn’t approve of their decisions and backs China full throated.
It’s fascinating how this has in a sense paralleled the US foreign affairs policies as well. China and the US seem to have some stark similarities in the face of things.
The Quick conclusion!
Well with all this said, it would seem that markets will, in the short term, rise. More specifically, the commodity markets globally will have their fair share of price increases and volatility. This is where things are for sure going to get interesting.
To add further depth, these two aspects of the world economy has there fair deal of overlapping economic conditions. One May exasperate the other.
Great summary!