Israel and Hamas are currently in a dangerous turbulence of escalating acts of terrifying violence, after a surprise attack on Saturday involving aerial, sea and ground operations, initiated by the Palestinian group from the Gaza Strip.
Till now, the warfront continues to witness a death toll of 1100 from both sides. An Israel minister confirmed that “scores of hostages”, including Americans, have been taken into neighbouring Gaza, according to reports from the region.
World leaders condemned the attack and the US said that it was sending warships and warplanes as it pledged “unwavering” support to its ally.
Being one of the strongest allies of Israel, Indian Prime Minister Narendra Modi also announced solidarity to Israel yesterday. The most cautious condition India currently studying is the economic repercussions the country has to face if the war intensifies.
In the meantime, several major airlines, including American Airlines, Air France, Lufthansa, Emirates and Ryanair, have cancelled flights to Tel Aviv’s Ben Gurion airport until further notice.
Current Operations of India
As any casualty occurs in the world, the primary concern for India is to evacuate the Indian citizens over the affected region. Here, in Israel also, India is striving to bring back its stranded students, and the PMO is strictly monitoring the situation there, Union Minister of State for External Affairs Meenakshi Lekhi told reporters on Sunday. All Indian nationals have been asked by the Indian Embassy in Israel to remain vigilant and observe safety protocols.
Trade Agreements
If the war intensifies, the Global Economy expects a world-wide inflation similar to what we have experienced during the time of Russian-Ukraine war. The impact could be possibly felt harshly by India, since Israel is a major trade partner of the country.
Anil Trigunayat, Former Ambassador of India to Jordan, Libya and Malta, quoted in a news report saying that, “A direct conflict between Hamas and Israel may not impact India, but if other actors like Hezbollah and Iran get involved security and stability of the West Asian region will be terribly impacted which will have direct consequences for India’s energy supply, economy and investment and welfare of Expats.”
The war between Israel and Palestine could seriously affect the trade agreement it holds with India, regarding the defence system and budget of the latter taking a major hit. India has a long history of trade relations with Israel. In 2020 also, India and Israel have signed an agreement on cooperation in health and medicine.
High Risk for Indian Exporters
Indian exporters shipping goods to Israel may face higher insurance premiums and shipping costs due to the Israel-Palestine conflict, according to the think tank Global Trade Research Initiative (GTRI). As per the sources, the conflict may reduce the profits of domestic exporters but will not impact trade volumes unless war escalates. Reportedly, India’s outbound shipments to Israel in FY23 were $8.4 billion with diesel, cut and unpolished diamonds, and electronics and telecom components like integrated circuits, parts of photovoltaic cells being the top exports whereas total imports of $2.3 billion comprised mainly rough diamonds, fertilisers and herbicides.
Ascending Oil Price
On the grounds of the war occurrence, oil prices were already elevated on supply concerns caused by output cuts by Russia and Saudi Arabia, fuelling fresh worries about global inflation. If the Middle East tensions extend, it would give weight to ‘higher-for-longer’ Fed narrative, which may hurt rupee and lead to foreign equity outflows. As per experts’ revelation, Brent crude oil futures climbed 4.18, or nearly 5%, to $88.76 a barrel earlier today. On the other hand, US WTI crude rose 5.1% to $87.02 a barrel level. As a reaction to the war, global countries expect an uprise in oil price by 10-12% in the near term.
Moreover, the Israel-Hamas war reduces expectations Saudi Arabia will cut or eliminate its 1 million-barrels-a-day of output curbs, Citigroup Inc. analysts Ed Morse and Eric Lee reportedly said in a note. Risks are also growing that Israel will attack Iran, they said.
Stock Market Disturbances
As per available sources, a total of 1,774 out of 2,564 stocks that traded in early trade fell, with the BSE market capitalization shaving INR 3.5 lakh crore off investor wealth. It is also reported that, major equities gauges in the region fell Sunday, led by a 7% drop on Israel’s benchmark TA-35 stock index, its biggest loss in more than three years. The Tadawul All Share Index in Riyadh fell 1.2% while stocks in Qatar and Kuwait also weakened. Egypt’s EGX30 gauge declined as much as 5.4%.
Additionally, Tata Steel Ltd led Sensex losers, soaring 2.22% to INR 123.10. NPTC Ltd fell 1.91% to INR 231.25. State Bank of India Ltd (SBI) slipped 1.8% to INR 582.75. IndusInd Bank, Titan Company, Power Grid and Asian Paints fell up to 1.6%.
