The parties risk having conflicts spill over to other regions and even potentially directly hamper some oil trade.Īlready, global oil supplies have been dropping as Iranian oil exports have plunged in anticipation of the re-imposition of U.S. Meanwhile, the Syrian army operates antiquated and inaccurate air defense systems. There are geopolitical risks galore: This week’s downing of a Russian military plane over Syria highlights the potential for conflict to escalate there given that U.S., Russian, Iranian, Turkish and Israeli forces and multiple terrorist groups are all operating on or above Syrian territory. Indeed the global oil price, which currently is close to its highest price of the year, is expected to climb even higher by the end of 2018. Geopolitical events have an outsized impact on the global oil price when supply and demand are close. Yet, the formal gathering will matter far less than less-visible and seemingly unconnected trends: a rise in geopolitical risks and new data showing a further tightening in the global oil market. “Short-term, the picture is very difficult to predict.At first blush, one might expect a major meeting of Organization of Petroleum Exporting Countries (OPEC) and its associate non-OPEC producers in Algeria on Sunday, would have impact on developments in the global oil market.

“The key here will be that the political events do not impact the ongoing discussions with the IMF,” said Mattias Martinsson, chief investment officer of Tundra Fonder AB in Stockholm.

Pakistan owns just enough foreign-exchange reserves to cover under two months of imports. It asked commercial lenders to manage import-payment requests from their own inflows, such as exporter accruals and remittances, according to people with knowledge of the matter. The central bank is also stepping up measures to defend the currency. The South Asian nation needs $33.5 billion in the fiscal year through June 2023, while available financing stands at $35.9 billion, it said. The State Bank of Pakistan has also sought to ease frayed nerves, saying last week that the nation will meet its elevated funding needs comfortably with the IMF bailout remaining on track. “Renewed political volatility cannot be excluded in the current environment of slowing growth and high inflation.”įinance Minister Miftah Ismail has sought to reassure investors, saying in a podcast on state-owned Radio Pakistan that the country is expected to receive the next tranche of funding in late August after the IMF’s board meeting on the 24th of the month. “Political uncertainty was a significant factor in our recent revision of the outlook,” said Krisjanis Krustins, a Hong Kong-based director at Fitch. The IMF is seeking assurance Saudi Arabia and other nations will follow through with their funding commitments before approving a $1.2 billion loan to Pakistan. That’s well above the 1,000-basis-point level viewed as a threshold for distress.įitch Ratings downgraded the outlook on Pakistan’s credit rating to negative last week, citing deterioration in the nation’s external liquidity position and political risks in the implementation of the IMF program. The extra yield investors demand to hold Pakistan’s sovereign debt over US Treasuries exceeded 1,700 basis points on Monday, according to JPMorgan Chase & Co. The currency, which is down 23% this year, may drop further to 275 per dollar from about 230 on Monday, according to IGI Securities Ltd. “That’s adding to worries about Pakistan’s funding requirements, a large current-account deficit and runaway inflation, which will keep the domestic currency under significant pressure.” “Political uncertainty will prove to be a persistent risk in Pakistan and instability will continue to fester,” said Sumedha Dasgupta, Asia senior analyst at the Economist Intelligence Unit in Gurgaon, India. Investors are concerned that calls by ousted Prime Minister Imran Khan for early elections may imperil the IMF bailout. The nation is striving to stave off fears it will follow Sri Lanka into a default this year with the government working to secure billions of dollars from the IMF and countries like China and Saudi Arabia.

Political strife