The Dollar’s Dance: Geopolitics and the Global Commodities Market, 30 OCT

The Dollar’s Dance: Geopolitics and the Global Commodities Market

In the bustling exchange shops of Baghdad and Erbil, the US dollar surged on Monday, following the closure of Al-Kifah and Al-Harthiya stock exchanges. The dollar prices reached 161,900 Iraqi dinars for every $100, compared to the morning rates of 161,550 dinars against $100. But behind these figures, lies a deeper economic narrative – a reflection of the complex interplay between geopolitics and global commodities market.

The Dollar’s Dance in Baghdad and Erbil

Exchange shops in the local markets of Baghdad reported a rise in selling prices, reaching 163,000 Iraqi dinars for $100, while the purchasing price stood at 161,000 dinars for the same amount. In Erbil, the selling price reached 161,500 dinars for every $100, and the purchasing price at 161,400 dinars.

These fluctuations in dollar prices are not mere daily market variations. They are the echoes of a global commodities market responding to the reverberations of conflict. And this time, the conflict in question is the ongoing Israel-Gaza tension.

Ripples in the Oil Market

The World Bank warns that the conflict, initiated by an attack from Hamas on Israel, may lead to a significant surge in commodity prices, particularly oil and gas. Energy prices have already seen a 9% increase since the start of the conflict, with potential for further shocks. This situation echoes historical events such as the Arab oil embargo, Iranian revolution, and the Iraqi invasion of Kuwait, which caused substantial disruptions in oil supplies.

If the conflict escalates significantly, it could disrupt oil supplies extensively leading to an initial surge in oil prices and impacting other markets. The World Bank’s commodity price index has already experienced a 5% rise in Q3 due to supply-side issues in the oil markets. The World Bank forecasts average oil prices at $90 a barrel this quarter but has also provided three different scenarios based on varying levels of disruption: small-disruption scenario, medium disruption, and regional conflict.

Global Impact and the Future

The global reliance on oil has lessened with a geographically diverse supply, which could potentially mitigate some of the effects of escalation. In addition to oil and gas, natural gas and gold prices are also expected to rise due to the conflict, with futures for these commodities anticipated to cross $2,000 an ounce.

Overall, the World Bank’s warning highlights the potential for significant disruptions in commodity markets and the broader economy if the conflict escalates further. Investors and policymakers across the world should closely monitor the situation. And as the dollars dance in Baghdad and Erbil, it serves as a reminder of how closely our global economies are intertwined, shaped by geopolitics and the tides of conflict.

https://bnn.network/finance-nav/the-dollars-dance-geopolitics-and-the-global-commodities-market/