Whatâs Going On Here?The Suez Canal has been blocked for a few days now, in what has to be the worldâs most mortifying three-point turn. What Does This Mean?The Suez Canal â which runs through Egypt and connects the Mediterranean Sea to the Red Sea â is seriously important, with some $10 billion worth of trade passing through every day. Or rather, thatâs what should be happening: nothingâs been able to get through ever since a 400 meter-long, 200,000-tonne container ship got stuck during a storm on Tuesday. Thatâs left 237 ships â and counting â waiting on either side.
A short-term disruption was unlikely to have much of an impact, but investors started to pay more attention after reports on Thursday suggested it could take weeks to resolve the blockage. And when you consider that economically vital commodities â crops, livestock, oil, fuel, chemicals, and much more â are aboard some of these ships, you start to understand why⌠Why Should I Care?For markets: The blockage might hurt stock markets.
Consumer products and the components used to make them are stuck on the canal too, and the longer theyâre held up, the more companiesâ profits â and in all likelihood stock prices â will suffer. If that âsupply-sideâ panic sounds familiar, it might be because it was all investors were talking about this time last year, when the pandemic first brought global trade to its knees.
For you personally: The blockage might hurt your bank balance.
If this brouhaha drags on, one outcomeâs almost guaranteed: higher inflation. Thatâs because a shortage of in-demand commodities and products will push up prices of those that are available. Any concerns about inflation could encourage investors to sell stocks again, sure, but it could also come back on you in a more noticeable way: youâll have to pay more for products, leaving you with less cash to spend elsewhere. | 