Finimize - 🛢 Oil's up again

What’s going on here?

The price of oil jumped on fears of renewed instability in the Middle East.

What does this mean?

Oil prices had started to flatten out before the weekend, as investors expected rising interest rates to slow global economic growth and curb demand. That marked the end of a slow climb they’d started in July. But on Saturday, unexpected violence broke out in Israel. Now that retaliations have started in Gaza, too, fears are mounting about the region’s future – and that’s playing out in oil prices. After all, the Middle East accounts for nearly one-third of the world’s oil supply. And even if the conflict doesn’t immediately impact supply, any escalation that involves major oil-producing nations or sparks output cuts and sanctions would cause disruption. So, concerned about the range of situations that could follow, investors have already sent oil prices upward.

Why should I care?

For markets: The world will be impacted.

Neither Israel or Gaza are major oil producers, so there’s no direct threat to oil pipelines or supply chains right now. Plus, geopolitical events rarely interfere with oil prices for long. But with countries around the world already facing low oil inventories, the mere idea of potential disruptions could prevent prices from falling. And for major economies that are only just making headway against inflation, a rise in prices could partially reverse months of progress.

The bigger picture: Prepare your portfolio.

Geopolitical risk was already high around the world: Ukraine is still at war, there have been seven coup attempts across Africa in the last few years, and tensions are still high between the US and China. Investors need to brace for that volatility to impact their emotions, and therefore decision-making, and their portfolios: you’ll want to be very well diversified and make sure you’re not carrying more risk than you can handle.

What’s going on here?

China’s Golden Week holiday brought in less money than expected, more proof that the economy’s still far from roaring back.

What does this mean?

China’s Golden Week holiday was anticipated to showcase the country’s long-awaited recovery, with revelers splashing enough cash to give the world’s second-biggest economy a reason to celebrate. Just over 800 million domestic trips were made over the eight-day vacation that ended last Friday, bringing in $103 billion in domestic tourism revenue. Thing is, that’s only a smidgen better than the pre-pandemic total in 2019, despite this year’s celebrations lasting for one extra day. And it landed below official projections too, which had set sights on nearly 900 million trips and $107 billion in revenue. That’s a sign China's economy as a whole is still far from fighting fit.

Why should I care?

The bigger picture: China’s Achilles’ heel.

Golden Week is a crucial period for property developers, but Chinese home sales over the period were lower this year than last. That, at a time when the government’s pouring support into the struggling sector: it’s reduced the amount of money banks need to keep on hand, slashed interest rates, and eased the requirements for home purchases. And because the state of the property market heavily influences the population’s spending habits, China will need to harden up the sector somehow. Otherwise, consumer spending will never get back to its pre-pandemic ways, depriving the economy of a critical growth engine.

Zooming out: Come fly with us.

China’s domestic travel might’ve trickled in below expectations, but it’s holding up better than international travel to and from the country. And to rub salt in the wound, the rest of the world’s proposing a toast. After four years of out-of-steam numbers, global airline capacity – that’s the number of seats available multiplied by the distance flown – is set to land above 2019’s levels this week, according to aviation analytics firm Cirium. That’s a major milestone in the $1 trillion-plus travel sector’s pandemic recovery.