Nervous eyes on the Suez Canal as Egyptian unrest hits world economy

Nervous eyes on the Suez Canal as Egyptian unrest hits world economy

Egypt’s political turmoil has left traders nervous, pushing oil and gold prices up and sending Asian stock markets down as concerns mount that the unrest will affect trade through the Suez Canal, a vital shipping route.

AP – Oil prices closed in on the $100 a barrel mark on Monday as traders grew increasingly worried about unrest in Egypt, while stock markets in Asia mostly fell.

Share prices partly lost ground due to last week’s sharp falls on Wall Street — the result both of instability in Egypt and poor corporate results.

However, resource stocks gained on higher prices for oil and gold.

Tokyo’s Nikkei index was down 1.22 percent in morning trade, Sydney’s S&P/ASX 200 index fell 0.87 percent and Hong Kong’s Hang Seng lost 1.25 percent.

But the Shanghai Composite Index was up 0.36 percent, with notable gains among oil companies and gold miners.

World oil prices rose, with the most obvious threat from Egypt’s political turmoil the risk that supplies through the vital Suez Canal could be disrupted.

New York’s main contract, light sweet crude for March delivery, was up 37 cents at $89.71 per barrel in morning trade. Brent North Sea crude for March rose 18 cents to $99.60.

The Brent price was likely to fuel expectations that oil could top $100 a barrel, posing a worrying risk to global economic recovery.

Tokyo saw heavy losses among companies with direct exposure to Egypt, where President Hosni Mubarak is under intense pressure from continued mass unrest, amid calls by Western governments for a peaceful political transition.

Among Japanese stocks losing ground were Nissan Motor, which operates an assembly plant in Egypt, and Toshiba, which is preparing to build a television factory there, Dow Jones Newswires reported.

Asian markets were not helped by Wall Street’s poor performance — the blue-chip Dow Jones Industrial Average lost 0.41 percent over last week after eight straight weeks of gains.

Adding to pressure were disappointing corporate earnings reports, including from tech bellwethers Amazon and Microsoft, and industrial heavyweight Ford Motor Co.

However some analysts were more sanguine about any knock-on from the situation in Egypt.

Suez canal which links between Red sea and Mediterranean

Photographed
Archived

Revenue from Egypt‘s Suez Canal dropped 1.6 percent to $416.6 million in January from $423.4 million in December but was up 8.6 percent from a year earlier, a state website showed on Wednesday.

Egyptian officials have said the Suez Canal–a barometer of world trade–has not been affected by the political turmoil in Egypt in recent weeks as protests continue across the country demanding that President Hosni Mubarak step down.

Rising global oil prices and the government’s commitment to maintain the waterway’s traffic have supported the canal’s revenues, an economist said on Wednesday.

“The increase in oil prices … further reiterates the importance of the Suez Canal as a more economic route for vessels to take rather than longer routes,” said Mohamed Rahmy, economist at Beltone Financial.

U.S. oil climbed above $87.20 a barrel on Wednesday, led by strong performances in the global stock markets and a surprise draw down in crude inventories in the world’s top oil consumer.

“Throughout the events of the past 15 days, the government has reiterated its commitment to protect the Suez Canal and to ensure that traffic would continue uninterrupted,” Rahmy said.

“There isn’t a reason why the Suez Canal would be affected by these (political) events,” said Rahmy adding that any disruptions in port activity in Egypt would not have a direct link to the canal’s operations.

A senior official said on Tuesday that strikes by workers in companies in the Suez Canal zone would not affect Suez Canal operations and movement of ships. Around 3,000 workers in companies owned by the Canal authorities and based in Ismailia and Suez went on strike on Tuesday over pay and conditions.

The Suez Canal is a vital source of foreign currency in Egypt, along with tourism, oil and gas exports and remittances from Egyptians living abroad.

Egypt’s Prime Minister Ahmed Shafiq said on Thursday the canal was operating normally despite the unrest in Egypt.

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