American consumers may soon start to feel the pinch of the continuing conflict in the Middle East which has already delivered a direct shock to global energy prices and is beginning to spread to a wider range of economic sectors, an American financial analyst said on Thursday.
The conflict -- which erupted after the United States and Israel launched joint attacks on Iran on Feb. 28 and sparked a wave of retaliatory strikes across the region -- has rattled global energy markets, fueling concerns about supply disruptions and higher oil prices.
In an interview with the China Media Group (CMG), Michael Collins, CEO of WinCap Financial, a Boston-based wealth management and financial planning firm, said that the conflict poses the biggest economic threat to the all-important energy sector.
Much attention is focusing on the severe disruption to shipping through the Strait of Hormuz -- a vital passageway which typically carries around one-quarter of global seaborne oil trade. In addition to crude oil, the global liquefied natural gas trade is also facing challenges, with market volatility significantly increasing.
However, Collins warned the impact of the war will not stop at energy, but may continue to spill over into other key sectors such as fertilizers, semiconductors, transportation, and supply chains.
"Energy is definitely still the largest risk here, but there are also other concerns around fertilizer prices, sulfur, which goes into the construction of copper throughout Africa's copper belt, and helium, which is used in the manufacturing of microchips. We've already seen a dramatic increase in the cost of microchips," he said.
Collins also believes ordinary American consumers may start to feel the real knock-on consequences of the war more acutely in the next one or two months, as the cost of living, including food, may continue to rise.
He said the main risk facing the U.S. is not the supply shortage itself, but the continued squeeze on consumption and inflationary pressures brought by rising prices.
"So the higher prices go, the more discretionary spending is taken out of the consumer's wallet. So we're going to continue to see that and I think it's already happening," said Collins.
US consumers set to feel squeeze as economic impact of Mideast conflict widens: financial analyst
