Capital Economics Research Institute ruled out the possibility that the increased shipping costs resulting from redirecting commercial vessels away from the Red Sea would cause global inflation to rise again.
However, the institution mentioned in its report that the expansion of the Gaza war to include oil-producing countries like Iran could create inflationary pressures through increased energy prices.
According to the report, the cost of shipping needs to increase significantly more than it did last week in order to have a noticeable impact on global inflation levels, quoting the Arab World News Agency (AWP).
He indicated that when container shipping rates jumped 900% in 2021, it only led to a slight increase in global inflation estimates by a few decimal points.
The report stated that the majority of global shipping costs consist of contract rates for periods that extend to a year or more, which are less volatile than the “immediate” costs of securing a container spot on the next available journey.
He also stated that the risks of disruptions in the shipping process leading to widespread shortages of goods and an increase in inflation seem to be low risks.
The report indicates that global supply chains are currently in a very good position to accommodate flight delays due to bypassing Cape of Good Hope, and that inventories of manufactured goods are abundant compared to demand. It adds that logistics managers say that the utilization of capacity in the global logistics network is low, compared to when shipping congestion occurred in 2021.
The report also stated that even if delayed shipping operations lead to a temporary shortage in some sectors, the demand environment is not conducive to inflationary pressures as it was in 2021-2022.
He said that while it is unlikely for current shipping disruptions to hinder the downward trajectory of global inflation, any significant escalation of military conflict could lead to higher energy prices, which will ultimately be passed on to the consumer.
The institution explained that the possibility that may drive oil prices higher than its current estimates of $70-80 per barrel this year, thus fueling inflation, is the widening scope of the war in Gaza to include major oil producers in the region such as Iran and Saudi Arabia or the war leading to stricter sanctions on Iran.
