Recently, the conflict between Israel and Iran has escalated. Economists believe that this could have an impact on global markets, triggering chain reactions in commodity prices, with Brazil also possibly being affected.

Threats to Maritime Passages Could Affect Brazilian Exports

According to a report by "gazetadopovo" on June 15th, Iran strategically controls the Strait of Hormuz alongside Oman, a crucial passage leading from the Persian Gulf to the Indian Ocean and a primary route for Saudi Arabian product imports.

Many of Brazil's export goods need to be transported through the Strait of Hormuz. For instance, Saudi Arabia and the UAE are significant export markets for Brazilian meat producers in the region. Therefore, if restrictions are imposed on this maritime passage, Brazil's export trade will be severely impacted.

Global Oil Price Increases Could Raise Brazilian Commodity Prices

In the global economic marketplace, the significance of the Strait of Hormuz is mainly observed in oil transportation. Currently, about a quarter of global oil imports and exports pass through the Strait of Hormuz, including Iran's own oil and products from Saudi Arabia, UAE, Kuwait, and Iraq, the four main oil-exporting countries.

On June 13th, Israel conducted large-scale airstrikes against Iran. As reported by Reuters on the 14th, Iranian official Esmail Kosari stated that Iran is seriously considering blocking the Strait of Hormuz. Concerns over this passage being blocked led one of the world's largest oil tanker operators, Frontline, to announce on the 14th a halt to accepting new shipping contracts through the Strait of Hormuz.

Even if the Strait of Hormuz is not blocked, the conflict between Israel and Iran could potentially impact global oil prices.

Global crude oil prices rose by 7.26% on the 13th. From the 10th when discussions about a possible Israeli strike on Iran began to spread, to the 13th, crude oil prices accumulated a 12.3% increase. With the reopening of trading markets on the 16th, the upward trend in crude oil prices may continue.

The increase in global crude oil prices will quickly reflect in fuel prices at Brazilian gas stations. Additionally, the rise in oil prices will affect the prices of imported goods and products in Brazil that rely on foreign components for assembly.

Moreover, a significant portion of goods on Brazilian supermarket shelves depend on road transportation, with around 65% of freight being carried by trucks. Renan Silva, an economics professor at Ibmec Business School in Brasília, explained, "Our transportation matrix is mainly composed of road transport. Therefore, we see freight prices and the prices faced by end consumers also rise following an increase in fuel prices."

A second adverse impact this issue could bring is the need for the government to maintain high interest rates to combat inflation. Professor Silva stated, "We are already studying cases where actual inflation rates exceed the established targets. This is concerning as it could lead to Brazil's already high interest rates remaining elevated."

Market turmoil is favorable for the US dollar, potentially exerting inflationary pressure on Brazil

During periods of turmoil, economic markets typically seek US dollar assets as a safe haven, leading to an appreciation of the US dollar. When this occurs, the Brazilian real usually depreciates, causing prices of Brazilian commodities and their derivatives to rise. Silva mentioned, "Although not confirmed, the US dollar has appreciated relative to other currencies, which could bring inflationary pressure to Brazil as our production inputs heavily rely on imports."