As ongoing tensions over the US-Iran conflict move beyond geopolitics into global markets, concern grow about potential supply-chain disruptions with the prolonged closure of the Strait of Hormuz, a strategically crucial waterway for global supplies
Supply-chain disruptions could be just two weeks away if tensions in the ongoing US-Iran conflict continue, Neelkanth Mishra, chief economist at Axis Bank and head of global research at Axis Capital, told NDTV Profit on Friday.
Mishra noted that the financial markets are now deeply intertwined in the conflict, with Iran appearing to be using market pressure as a strategic lever to push the US to get concessions and, therefore, the Strait of Hormuz is important. He acknowledged that the US administration has so far managed market expectations relatively well.
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The ongoing conflict in the Middle East and supply-chain disruptions could pose challenges to the Indian economy via higher energy costs, input cost pressures, disruption in trade flows and financial market spillovers, an RBI bulletin said on Thursday.
The conflict in Middle East intensified pressures on the global supply chains in March with some easing observed in the first half of April, said the 'State of the Economy' report published in the Reserve Bank's April bulletin.
Domestic economic activity displayed resilience in many segments, with a slowdown in a few others, it said. The intensity and duration of the conflict, the result along with the damage to energy and other infrastructure is a risk to the inflation and growth outlook, it added.
"If the conflict persists and supply chains are not restored early, it may create challenges to the domestic economy in the form of higher energy costs, input cost pressures, disruption in trade flows and financial market spillovers," the report said.
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