Risks Emanating from Iraq?


The building up of tensions in Iraq, following the problems in Ukraine, has emphasised the geo-political risks of global growth. Neither of these economies is big enough to influence global demand directly, but the potential negative fall-out could come from the effect on oil prices. 



The building up of tensions in Iraq, following the problems in Ukraine, has emphasised the geo-political risks to global growth. Neither of these economies is big enough to influence global demand directly, but the potential negative fall-out could come from the effect on oil prices. The situation in Iraq in particular has pushed up oil prices, but the rise so far is not substantial enough to have a major impact on the economic outlook. The favourable global supply situation also suggests that oil prices will ease, once the situation calms down.

Geo-politics Back to the Fore

Just as the unrest in Ukraine has come off the front pages, the building tensions in Iraq have risen to take their place. Off and on, geo-politics has raised its head as risk to the global economy over the last few years. As in the case of Ukraine, Iraq is not big enough to have any significant direct impact on global demand. To put it bluntly, whether these economies boom or contract has little impact on views on the world economic outlook. However, these geo-political developments do matter, mainly because of their potential impact on oil prices. The violence in Iraq, which is the world’s sixth largest producer of oil, has led to fears about a disruption of oil supply, pushing oil prices higher over recent days.

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