Trade Insights: Israel-Iran Conflict’s Influence on Brazilian Market

The escalating tensions between Israel and Iran are set to dominate market discussions in the weeks ahead as financial analysts scramble to decipher the impact of this geopolitical standoff.

Sérgio Goldenstein, Warren Investments’ chief strategist, foresees potential repercussions on the currency market as tensions rise, potentially sparking a risk-averse sentiment and bolstering the global value of the dollar.

“If the Brazilian real continues its depreciation, it could fuel inflationary pressures and undermine the Central Bank’s efforts to lower interest rates. Despite economists’ median forecast for the terminal Selic rate at 9%, the futures market is already pricing in a final Selic rate around 10/10.25%,” highlights Goldenstein.

Impact on commodities

According to Fernando Iglesias, a commodities and proteins analyst at Safras & Mercado, the impact of the Israel-Iran conflict on assets lies in the exchange rate. By midday, the futures dollar had risen by 1.17%, reaching R$ 5.188.

“Impacting commodities exports with the dollar hovering around R$ 4.90 differs greatly from when it approaches R$ 5.20. With the real’s depreciation, we witness more aggressive exports, with increased premiums for soybeans and corn, thus enhancing the competitiveness of Brazilian products,” elaborates Iglesias.

The following chart shows the export volume of Brazilian corn from January 2022 to February 2024. The data comes from Datamar’s top-notch maritime trade intelligence service DataLiner.

Brazilian Corn Exports | Jan 2022 – Fev 2024 | WTMT

Source: DataLiner (click here to request a demo)

He underscores that the United States stands as Brazil’s main competitor in the meat and grain market, and a weakened dollar should undermine American commodities, boosting the competitiveness of Brazilian grains.

“Conversely, heightened tensions could potentially disrupt the flow of chicken exports to the Middle East, but this is contingent upon a scenario of escalated tensions,” he concludes.

Goldenstein also warns of another risk – a surge in oil prices – due to its potential impact on global and local inflation.

“If the Central Bank concludes the cycle with a Selic rate at a still highly restrictive level, it could negatively affect the credit market and domestic activity,” he offered.

Source: Money Times

Click here to read the original news article: https://www.moneytimes.com.br/israel-x-ira-conflito-deve-pesar-sobre-as-commodities-mas-brasil-pode-ganhar-com-isso-entenda/

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