HSBC says Iran war is hitting confidence as businesses warn over economic risks | HSBC
HSBC bosses said the Iran war was already hitting global economic confidence, as a number of businessmen warned about the impact of the conflict.
Georges Elhedery, the bank’s Lebanese-born CEO, He told Bloomberg Television At the HSBC conference in Hong Kong: “We are saddened and concerned about what is happening in the Middle East, not only about what is happening but also about how long it will last.
“Unfortunately, some of these uncertainties initially started to put pressure on general confidence. We are concerned that the continuation of this conflict will have a global impact beyond the Middle East,” he said, pointing to prices of goods, oil and refined products, as well as fertilizers and metals.
Brent crude, which rose above $100 (£74) a barrel on Monday, fell 0.9% to $98.5 a barrel on Tuesday morning, despite a US blockade of Iranian ports that comes into force on Monday. Negotiating teams from the United States and Iran may return to Pakistan’s capital Islamabad this week for more talks after 21 hours of talks over the weekend ended without a deal.
In London, the FTSE 100 rose 22 points, or 0.21%, to 10,605 points. Imperial Brands, which makes e-cigarettes as well as Davidoff and West cigarettes, was leading the FTSE 100 losers after citing a “more uncertain geopolitical and macro environment”.
UK recruitment firm PageGroup said the conflict in the Middle East was “leading to an increasingly uncertain outlook for the rest of the year”, with the UK and Europe, the Middle East and Asia “challenging markets” and salaries below levels in 2022 and 2023.
HSBC has a 31 percent stake in Saudi Awwal Bank. The London-based lender is among the European banks with the most exposure to the Middle East, which accounts for about 4% of its pre-tax profits, according to analysts at JP Morgan Chase.
But Elhedery said the bank has so far seen only “very benign capital outflows” from the Middle East.
Since the US and Israel began attacking Iran on February 28, some wealthy investors in the Middle East have been exploring whether to move to places like Singapore and Hong Kong.
HSBC President Brendan Nelson emphasized that oil-induced inflation poses a major risk to the world economy and that a Middle East peace agreement is essential to ensure a significant resumption of global energy flows.
Speaking at the HSBC Global Investment Summit in Hong Kong, Nelson said: “The longer the outage lasts, the more the indirect effects of higher energy costs will increase inflation and suppress growth.”
Clothing manufacturers that use polyester and other synthetic fabrics derived from petroleum products have been hit. Tom Beahon, co-founder and co-manager of sportswear company Castore, which produces Premier League football jerseys and England cricket jerseys, said costs had increased by 10 per cent to 15 per cent and some of this would be passed on to consumers if the Iran war continues for a few more months.
Beahon told BBC Radio 4’s Today programme: “The biggest challenge has been around volatility. So it’s very difficult to plan for prices to rise up to 40% one day and then drop significantly again the next day.”.”
Another challenge, he said, is product transportation as airlines reduce flights and ships are still stranded in the Strait of Hormuz. “But there is hope that if things start to pick up over the next few weeks this will not have a significant impact on customers,” he said.
Corneel Koster, chief executive of Virgin Atlantic, told the Financial Times that jet fuel prices were more than double pre-war levels. He said: “Whatever happens in the Gulf going forward… some of this disruption in global energy prices will be permanent.”
Rachel Reeves called for coordinated economic action as she headed to the spring meetings of the International Monetary Fund and World Bank in Washington. “There must be a line in the sand on how we deal with the Iran conflict, global crisis and instability,” the chancellor said.
