Donald Trump he said he glimpsed a cease fire in Ukraine as a possible side effect of low oil pricessuggesting that a drop in energy revenue could weaken the ability of the Russia to finance the war effort. “I think we will have a fire because the oil prices are low“he said, according to what reported by Bloomberg.
Because the downward oil is a problem for Putin
The price of oil represents a decisive variable for Russia, whose economy depends structurally on the export of hydrocarbons. According to official data, over a third of the federal budget is financed directly by oil and gas revenues. A prolonged drop in Brent or WTI below the critical threshold – estimated between 70 and 75 dollars per barrel – can seriously compromise the sustainability of the Kremlin.
In reliable market scenarios, the Russian government is forced to erode the National Wellness Fundthat is, the reserves of the country for difficult moments, to issue debt in local currency (rubles) in less favorable conditions or to introduce Cut cuts in public spendingincluding resources intended for military sector. All this occurs in a context of growing economic pressures deriving from Western penaltieswhich reduce access to international financial markets and limit the ability to diversify the sources of financing.
A further critical element is represented byRublo trendhistorically related to oil prices, with inflationary repercussions on consumer prices and on the import of technological goods. The combination of minor revenue, currency weakness and internal prices instability puts at risk not only the macroeconomic balance, but also internal political cohesion and, therefore, consent to war.
What the markets say, the vulneravility of Asia
Currently, the WTI oil with delivery in August exchanges under the 66 dollars per barrelwhile the Brent It remains stable just below 68 dollars. After the peak linked to Tensions between Israel and Iranthe prices returned to lower levels, suggesting that the markets do not expect an imminent energy crisis. Nonetheless, the oscillations remain strongly sensitive to geopolitical developments.
Tensions in the Middle East have again turned on the spotlight on the risks of global energy shocks. The US attacks against Iranian nuclear sites had in fact raised the alert, with the fear that Tehran could close the Strait of Hormuzcritical junction for about a fifth of the worldwide world exports. A’escalation In that area it could quickly report the price of the barrel over 85 dollars, with relevant global impacts.
L’Asiain particular, is in a vulnerable position. Although the energy intensity of the continent has reduced, the structural dependence on imports remains high. Oil covers about 25% of the regional energy needs, with 80% of the satisfied demand through imports. However, until the price is maintained around $ 70, the macroeconomic impact should remain contained. This does not mean that a lasting increase in energy prices represents a significant risk for the public budgets of the imported countries, due to the need to increase subsidies or face inflationary pressures. And if the core inflation is traced back, the central banks of Asia may have to slow down or suspend the monetary ease cycles pursued so far.
Emerging currencies, the data to be kept in the next few days
Globally, the impact of oil prices is also reflected on Emerging currencies. Net export countries such as Brazil e Colombia They benefited from a revaluation of their respective coins, while more vulnerable economies such as Philippines or India have seen a worsening of their accounts with abroad. In the next few days, the attention of investors will move to Key macroeconomic data: Inflation and employment in the United States, PMI indices in the Eurozone and tankan polls in Japan will offer a more clear picture on the trajectories of the main economies.
Meanwhile, Trump has granted a respite on the commercial front, a relaxing signal that could strengthen the trust of the markets.
But if oil prices remain low, Trump could use them as a diplomatic lever to cool other outbreaks, starting from Ukraine. Provided, however, that calm on the markets is not only the effect of a temporary quiet before new storms.
