NUNZIUM

News That Matters

23/01/2024 ---- 05/02/2024

Amid the aftermath of the recent Israel-Hamas war, global attention is now shifting towards the escalating conflict in Yemen. The Red Sea, a strategic maritime route carrying an estimated 12% of global trade, is the latest epicenter of tensions. The United States and Britain have launched strikes against 36 Houthi targets in Yemen in response to attacks on American and international interests by Iran-backed groups. These strikes were executed by US warships and American and British fighter jets and were not limited to one night, one target, or one group.

The Houthi rebels, supported by Iran, have been a significant adversary for the U.S. since the Hamas-Israel conflict began on October 7. This conflict resulted in over 1,200 deaths and about 250 hostages. The Health Ministry in Hamas-ruled Gaza reported more than 26,000 deaths and over 64,400 wounded since the war's inception. The Houthis have been conducting frequent missile or drone attacks against commercial and military ships in the Red Sea and Gulf of Aden.

In response to the escalating tensions, the European Union plans to launch a naval mission, Aspides, on February 19. The mission aims to safeguard commercial shipping in the Red Sea from missile attacks by Houthi rebels in Yemen. The Houthi attacks have caused major shipping companies to opt for longer, costlier routes, leading to shipping delays and temporary production halts in some European factories. These disruptions have triggered concerns of potential inflation in Western economies.

Belgium, France, Germany, Greece, and Italy, five EU member states, have publicly committed to the mission. Unlike the US and UK's Operation Prosperity Guardian, which has bombed multiple Houthi targets, the EU's mission will solely focus on protecting ships and intercepting incoming missiles. The EU's top diplomat, Josep Borrell, assured that the mission's capabilities will be "proportionate to the threat" and will not include any operations on land, only at sea.

Meanwhile, Yemen's Houthi militants attacked an oil tanker, Marlin Luanda, in the Gulf of Aden, causing a fire. The British oil tanker was operated by the commodities group Trafigura. The Houthi militants claimed responsibility for the attack, which they say was in retaliation to the "American-British aggression against Yemen" and in support of the Palestinian people.

The ongoing conflict within Yemen between Houthi forces and a Saudi-backed coalition has led to a humanitarian crisis. The conflict, which began with the Houthi forces taking over the capital Sanaa in 2014, escalated into a wider war in 2015 when a Saudi-led coalition intervened. The United Nations Development Programme reported in 2021 that the conflict has resulted in up to 377,000 deaths, with more than half of those from indirect causes associated with the conflict, such as lack of food, water, and healthcare.

The escalating tensions in the Red Sea carry high stakes for not only the nations directly involved but also for global trade and security. The world watches closely as the ripples of this conflict continue to spread, waiting to see how the situation will unfold.

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In January 2024, a meeting of eurogroup finance ministers was convened in Brussels, graced by European Central Bank (ECB) President Christine Lagarde and Netherland’s Finance Minister Steven Van Weyenberg. The primary focus of the meeting revolved around the topic of interest rates. Despite market speculation of potential rate cuts in March or April, the ECB, led by Lagarde, expressed a commitment to maintain high benchmark rates until inflation returns to the 2% target. This stance is driven by concerns over high borrowing costs and associated risks.

This speculation of rate cuts by central banks, including the ECB and the U.S. Federal Reserve, previously led to a boost in stock market indexes towards the end of 2023. However, the optimism has since been tempered in 2024, with stock prices cooling off due to worries about weak economic growth and geopolitical disruption, including the Israel-Hamas conflict.

The U.S. Federal Reserve, conversely, is expected to initiate a cut in its key rate by mid-2024, as indicated by senior Fed officials. This follows the decision to maintain borrowing costs at a 23-year high on January 31, 2024, with target benchmark interest rates held between 5.25% and 5.5%.

Inflation in Europe, which hit a peak of 10.6% in October 2022, has since fluctuated, rebounding to 2.9% in December from 2.4% in November. This fluctuation is largely attributed to falling energy prices and easing supply chain bottlenecks. The high prices have had a widespread impact, affecting services and wages across the economy.

The economy of the 20 European Union member countries that use the euro currency saw a marginal contraction of 0.1% in the July-September quarter. This sluggish growth coupled with the impact of higher interest rates has sparked further speculation about potential rate cuts. The ECB's meeting on January 25 was expected to provide significant insights into the timing of these potential cuts.

In the U.S., inflation rose to 3.4% in December 2023, up from 3.1% in November, exceeding the 2% inflation target set by central banks, including the Bank of England and the ECB. The Bank of England Bank Rate has remained steady at 5.25% since August of the previous year, while the ECB has kept its main refinancing rate at an all-time high of 4.5%.

Speculation was rife that the Fed would announce its first interest rate cut since 2019 at its March FOMC meeting. However, stronger than expected economic data has led to a recalibration of these expectations, with the current probability of a March rate cut dropping to 49% from a previous 80%.

Goldman Sachs economist David Mericle has suggested that the Federal Reserve should cut interest rates in March due to potential risks to the labor market. Despite the labor market's current robustness, there are growing concerns of potential job losses as corporate layoffs have seen an uptick in recent weeks.

In summary, central banks worldwide continue to grapple with the delicate balance of controlling inflation while promoting economic growth. The effectiveness of their strategies will become clearer in the coming months.

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The Gaza region, currently in the throes of a devastating military offensive led by Israel for almost four months, has become a bleak landscape of human suffering. Over 26,000 lives have been lost, 85% of its 2.3 million population displaced, and a significant portion of its citizens are teetering on the edge of starvation. Amidst this turmoil, the United Nations' top court has recently intervened, ordering Israel to halt further death, destruction, and, most alarmingly, alleged acts of genocide.

This order is a development in a genocide case initiated by South Africa, which has put Israel's actions under legal examination. Court President Joan E. Donoghue voiced grave concern over the ongoing loss of life and human suffering in Gaza. However, the ruling does not mandate a cessation of Israel's military campaign, making its implementation complex without a cease-fire or pause in the hostilities.

Israeli Prime Minister Benjamin Netanyahu has dismissed the court's readiness to consider genocide charges and pledged to continue the war. This stance was taken on the eve of International Holocaust Remembrance Day, a stark reminder of the horrors of genocide.

The conflict in Gaza has been characterized by significant loss and destruction. In addition to the Palestinian casualties, an attack by Hamas militants on Israeli communities on October 7 resulted in approximately 1,200 deaths and 250 kidnappings. The court has urged Hamas to release the remaining hostages.

The court's interim ruling has been applauded by Palestinian Foreign Minister Riyad al-Maliki and the South African government. However, it is uncertain whether Israel will adhere to the court's orders, which include preventing genocide, providing basic aid to Gaza's population, preventing and punishing any incitement to genocide, and reporting on measures taken within a month.

The case, the most significant international challenge to Israel’s war in Gaza, alleges that Israel's actions are genocidal as they aim to destroy a substantial part of the Palestinian national, racial, and ethnical group. Israel has refuted the filing, stating that their operations in Gaza were a response to attacks from Palestine Islamic Jihad and Hamas militants.

As the legal battle unfolds, the International Court of Justice's limited enforcement capabilities and the UN's role in implementing the decision have sparked debates about the role of international law and potential shifts in diplomatic relations. With the final ruling potentially years away and the dire situation in Gaza escalating, international observers await justice and peace for the embattled region.

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The American political arena is currently dominated by the figure of Donald Trump, the former President who is simultaneously embroiled in legal battles and successfully navigating the early stages of the 2024 election primaries.

Trump's legal troubles intensified when a New York jury ordered him to pay $83.3m (£65m) in damages to columnist E Jean Carroll for defamation during his presidency in 2019. This verdict follows a previous civil case that found Trump guilty of defaming and sexually assaulting Carroll in the 1990s. Despite his intention to appeal the ruling, which he has dismissed as a witch hunt, Trump holds the dubious distinction of being the first US president charged with a crime, facing four criminal cases encompassing 91 felony counts.

Despite these legal hurdles, Trump's political aspirations remain undeterred. As the Republican party's frontrunner, he is poised to challenge current US President Joe Biden in the November 2024 general election. Following victories in the initial Republican contests in Iowa and New Hampshire, Trump's position as the presumptive nominee is solidifying, in spite of opposition from the likes of Nikki Haley, the former UN ambassador.

Haley, who plans to continue her campaign in South Carolina, faces a challenging path. Despite pressure from high-profile Republicans to withdraw following Trump's New Hampshire victory, she remains steadfast. Her campaign maintains that 11 of the 16 states voting on Super Tuesday (March 5) have open or semi-open primaries where registered Independents can vote, offering her potential support. However, Trump's campaign has cautioned Haley to unite behind Trump or brace for a resounding defeat in her home state.

In a strategic move, Florida Governor Ron DeSantis suspended his presidential campaign and endorsed Trump, leaving Haley as the lone GOP challenger to the former President. Despite trailing both Trump and Haley in the primaries, DeSantis's endorsement of Trump signals a growing consolidation of support for Trump within the party.

Trump's legal challenges continue to mount, with accusations of a conspiracy to overturn the 2020 election by pressuring state officials to fabricate votes, overturn state election results, scheme to appoint fake electors, and disrupt the counting of official election results. Trump's legal team has sought blanket immunity, warning of the danger of politically motivated prosecutions of future presidents. However, the US Department of Justice (DOJ) and Special Counsel Jack Smith argue that granting immunity would permit future presidents to engage in criminal activity without fear of prosecution.

The legal and political saga of Donald Trump is a compelling chapter in American politics. As he simultaneously contends with courtroom battles and electoral victories, the upcoming months will be pivotal in his political trajectory. The question remains: will he triumph in both arenas, or will his legal struggles overshadow his political ambitions? The answer will unfold with time.

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The Red Sea, a pivotal conduit for international commerce, has recently emerged as a conflict zone, significantly impacting global trade. The waterway, responsible for 12% of global seaborne trade, has experienced disruptions due to attacks on civilian ships involving missiles, drones, and hijackings. This conflict, the most severe in decades, has affected shippers worldwide, leading to increased costs and economic apprehension.

The unrest began with the onset of the Israel-Hamas war. Despite retaliatory measures by the U.S. and its allies, along with a multinational naval operation, Houthi militants' assaults persist. This situation has prompted sailors to demand higher wages and insurance rates to soar, prompting shipping lines to circumvent the waterway.

The crisis has notably affected the oil market, with the volume of oil destined for Europe from the Middle East nearly halving due to Houthi attacks. This has intensified competition for crude supply that bypasses the Suez Canal, significantly affecting European markets. Consequently, Brent crude futures, pricing nearly 80% of the world's traded oil, recently reached their most bullish point in two months.

The Houthi rebels, mainly targeting vessels associated with Israel, have focused their attacks in the strait of Bab al-Mandeb, a significant trade route. This has led to some of the world's largest shipping companies suspending transit in the area, forcing vessels to reroute around the Cape of Good Hope in Southern Africa, resulting in increased freight rates.

The crisis has also significantly impacted the strategic Suez Canal, especially since the Ukraine war and sanctions against Russia have increased Europe's dependence on Middle Eastern oil. With the volume of Middle Eastern crude heading to Europe nearly halving, the Suez Canal's significance has grown.

The crisis's ripple effects have extended to China's oil trade with Iran and India's imports of Russian crude, causing disruptions and price hikes. Russia surpassed Saudi Arabia as China’s top crude oil supplier in 2023, shipping a record 107.02 million metric tonnes last year.

The crisis has also had human implications. The Greek-owned bulk carrier Zografia was recently hit by the Houthis, causing minor damage but thankfully no injuries among the 24 crew onboard.

Despite the U.S. and UK launching airstrikes against Houthi targets and seizing Iranian weapons destined for the Houthis, the rebels have pledged retaliation, heightening fears of further conflict and economic repercussions.

The Red Sea instability is affecting shipping routes and the use of the Suez Canal. If the situation escalates, European consumers could face higher energy costs, delayed shipments, and potential inflation. Major companies like Tesla, Volvo, and Suzuki have halted production at European factories due to supply chain disruptions caused by the Red Sea attacks. Shell has suspended all Red Sea shipments, and Qatar's prime minister has warned of impacts on liquified natural gas (LNG) shipments.

In conclusion, the Red Sea crisis underscores our global interconnectedness and the fragile equilibrium of international trade. It is evident that a resolution to the conflict is urgently needed for the stability of the global economy.

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