TheLittleTwentieth – Renowned Papers Edition, AI Infused

Local sources from India: Mint, BusinessLine.
UK coverage: The Sun.

The ongoing Israel-Hamas conflict has the potential to cause delays and complications in the India Middle East Europe Economic Corridor (IMEEC) project, according to the Global Trade Research Initiative (GTRI). The conflict, which has already entered its 15th day, could derail the prospect of a historic peace deal between Israel and Saudi Arabia, a crucial linchpin in the IMEEC framework.

The IMEEC is an ambitious economic corridor that aims to boost economic development by fostering connectivity and economic integration between Asia, the Persian Gulf, and Europe. The envisioned corridor would span from India to Europe, passing through the UAE, Saudi Arabia, Jordan, Israel, and Greece. The Memorandum of Understanding (MoU) for this was signed during the G20 summit in New Delhi last month, with participation from governments such as India, the US, the UAE, Saudi Arabia, France, Germany, Italy, and the European Union.

The conflict has also had an effect on fertilizer stocks in India, with shares of Gujarat State Fertilizers & Chemicals Ltd rising from around ₹167.50 to ₹203 apiece after the outbreak of the Israel war, delivering a return of more than 20 percent to its shareholders. Fertilisers And Chemicals Travancore or FACT share price has risen from around ₹510 to ₹710 apiece during the Israel-Palestine conflict, delivering a return of 40 percent to its shareholders.

Stock market experts have attributed the rise in fertilizer stocks to supply-related worries, with Israel’s port of Ashdod, a major hub for potash exports, operating in “emergency mode” due to the conflict. Shipping restrictions and “war risk” surcharges have been imposed, potentially hindering the smooth flow of goods.

The conflict has also caused investors to draw parallels to the Russia-Ukraine war, during which fertilizer stocks also saw a rise. However, Sonam Srivastava, Founder and Fund Manager at Wright Research, maintained that a major price hike, like what was seen after the Russia-Ukraine war, is not expected.

Omkar Kamtekar, Research Analyst at Bonanza Portfolio, said, “The Port of Ashdod in Israel, located to the north of Gaza, is a critical hub for the country’s potash fertilizer exports. This port accounts for approximately 3% of the global potash supply, which is currently disrupted as Israel is grappling with a conflict with Hamas. A concerning ripple effect that would amplify this disruption is if Iran were to be drawn into the conflict. Iran is a major exporter of nitrogen and holder of significant natural gas reserves, both of which are key components in the production of nitrogen-based fertilizers.”

The conflict has also raised concerns over the timeline of the IMEEC project, with GTRI Co-Founder Ajay Srivastava stating that the war may derail any progress made. He added that the disruption in the Middle East, a vital link in this corridor, may lead to delays and complications in the project’s execution.

Admiral Lord West, a former Navy chief, has warned that the Gaza crisis has the potential to escalate into a world war with the involvement of the UK and US. He outlines six steps that could lead to this scenario, starting with Israel overreacting and causing high civilian casualties in Gaza, which could prompt Hezbollah to join the conflict. This could then draw in Syria, backed by Russia, and potentially lead to a war with Iran. The US and UK have already sent military support to Israel, and if the situation worsens, NATO may increase its presence in the Eastern Mediterranean. The final step would be Saudi Arabia becoming involved due to its conflict with Iran-backed Yemeni rebels.

It remains to be seen how the Israel-Hamas conflict will affect the IMEEC project and the global fertilizer supply chain, but it is clear that the situation is a cause for concern. Investors should keep an eye on the situation and be prepared for potential disruptions.