The earthquake in Turkey brought uncertainty to the passage across the Strait, which may affect the price trend of bulk commodities and the stable operation of the international industrial chain and supply chain.
On February 6, local time, a strong earthquake hit southern Turkey and northern Syria, causing severe casualties and property losses in both countries.
"The Throat of the World"
Turkey straddles the Eurasian continent and connects the Black Sea and the Mediterranean Sea. It is known as the "throat of the world" because of its unique and essential geographical location.
In the context of the Russia-Ukraine conflict, the Bosporus Strait, close to Russia-Uzbekistan, plays an essential role in transporting food and delivering natural gas to Europe. The earthquake brought uncertainty to the passage across the Strait, which may affect the price trend of bulk commodities and the stable operation of the international industrial chain and supply chain.
Economic Crisis Worsened
Many analysts believe the earthquake will aggravate Turkey's economy and financial crisis. A report by the US Geological Survey stated that the earthquake could cause widespread damage, with estimated economic losses reaching 2% of Turkey's GDP.
According to media reports, a natural gas pipeline in Hatay province in southern Turkey exploded and caught fire on February 6, local time. On the New York Mercantile Exchange, the price of light crude oil futures for March delivery closed at US$74.11 a barrel, an increase of 0.98%; the price of London Brent crude oil futures for April delivery closed at US$80.99 a barrel, a rise of 1.31%.
Experts pointed out that the earthquake will impact Turkey's industrial chain and supply chain, exacerbate Turkey's currency depreciation and inflation, and cause losses to the recovering Turkish tourism industry.
Experts pointed out that the earthquake will impact Turkey's industrial chain and supply chain, exacerbate Turkey's currency depreciation and inflation, and cause losses to the recovering Turkish tourism industry. However, the earthquake destroyed thousands of buildings in Turkey. Among them, a thousand-year-old castle in Gaziantep, a UNESCO World Heritage Site, collapsed.
On January 5, Turkey's Istanbul 100 index plunged more than 5% intraday, triggering a circuit breaker. After 30 minutes of resuming trading, the stock index continued to plummet and started a second circuit breaker. At the close of the day, the index fell 7.4%, the most significant drop in 10 months. On the same day, the price of Turkish government bonds also fell sharply, and the yield of 10-year government bonds soared by more than 22%, the most significant increase in history.
After the earthquake, Turkish financial markets were strongly turbulent. In early trading on February 6, local time, the Turkish lira once fell to a record low of 18.85 and closed flat.
In 2022, the lira's exchange rate against the US dollar plummeted from 13.31 to 18.70, up to a 40% depreciation rate. The depreciation of the lira has also pushed up domestic inflation in Turkey. In October 2022, Turkey's inflation rate reached 85.51%, the highest level in 24 years. In that month, Turkey's transportation prices, including energy prices increased by 117% year-on-year, food prices increased by 99%, and furniture and other household items increased by 93.63%.
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