Arvind Sanger warns this factor could disrupt market’s ‘goldilocks’ scenario
The Managing Partner of Geosphere Capital Management said continued tension in the Red Sea could feed into inflation affecting liquidity flows.
Arvind Sanger, Managing Partner of Geosphere Capital Management is apprehensive about the increasing tensions in the Red Sea region, highlighting the potential global economic consequences. He believes if the current unrest in the Red Sea persists, it could trigger inflationary pressures, posing a significant threat to economic stability.
In an interview with CNBC-TV18, Sanger pointed out that the Shanghai Container Freight Index has more than doubled since late November 2023. If shipping routes continue to rise due to prolonged unrest, it might contribute to consumer inflation, especially in the United States and other regions.
“So as long as oil remains well-behaved and we do not get too much of consumer inflation, maybe this goldilocks scenario plays out and the Fed is cutting rates by March. But I think that is one of the risk factors in this kind of benign assumption that liquidity is going to be rapid, and everything is going to be hunky dory in 2024,” said Sanger.
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So far, oil prices have remained relatively stable despite the tensions, he noted. Brent crude traded near $78 a barrel and West Texas Intermediate was close to $73 on January 15 even after the US followed up the initial strikes against targets in Yemen with a fresh attack on a radar installation. While the global benchmark was up more than 4% at one point on January 12, it ended the session with a relatively modest gain of 1.1%.
Sanger believes assuming everything will be smooth in 2024 is risky, as geopolitical tensions could challenge the assumption of rapid liquidity and overall stability.
The Red Sea, a vital maritime route, is currently facing increased concerns due to Houthi rebel attacks disrupting commercial ships navigating the Suez Canal—a crucial sea route connecting Asia and Europe. The evolving situation in the Red Sea remains a focal point for global economic watchers.
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(Edited by : Shweta Mungre)
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