Singapore — Any escalation of conflict between India and Pakistan may impact currency, gold and shipping markets in the region, but other commodities are unlikely to see any immediate direct impact unless the situation drags on, analysts told S&P Global Platts Wednesday.
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"There is no big oil shipping route in that region. Therefore, I would not see any big impact on the oil market immediately. But yes, it escalates geopolitical tensions around the region. So markets will be on tenterhooks," said Sri Paravaikkarasu, Director for Oil at Facts Global Energy.
"I think the entire scenario will be negative for stock markets and currencies, but beyond that I don't see any immediate impact on oil demand and other things," said Amrita Sen, chief oil analyst at Energy Aspects.
Some analysts said that gold prices in the region could rise because of safe-haven buying if the tension escalates. The Indian rupee also fell against the US dollar on Tuesday, reacting to air strikes by India.
S&P Global Platts Analytics expects India oil products demand growth of around 260,000 b/d in 2019, compared with estimated growth of 195,000 b/d in 2018.
"India is a big player in the oil and LNG market. Pakistan is an emerging and key regional market to watch for LNG and fuel oil movements. So industry players will be keeping a very close eye on the situation there and how it develops," said Kang Wu, Head of Asia, at S&P Global Platts Analytics. "I don't see any immediate direct impact on demand but if the situation escalates, then things could be different."
Pakistan's LNG imports are expected to grow exponentially, from 4.9 million mt in 2017 to nearly 24 million mt/year by 2023, according to Platts Analytics, as the country faces declining gas reserves and rising consumption.
International media, quoting Pakistani officials, reported that Pakistan had shot down two Indian Air Force jets a day after Indian fighter jets struck a militant base inside Pakistan. There was no immediate comment from India on that statement. The moves have prompted leading nations to urge both countries to show restraint.
Tensions have risen after a suicide car bombing by militants in Indian-controlled Kashmir killed at least 40 Indian paramilitary police on February 14.
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