Peace talks, trade and capital flows

Talks between the US and Iran have provided a glimmer of hope that global energy markets could begin to normalise. But the conflict and the closure of the Strait of Hormuz have already inflicted heavy economic damage on the Gulf economies. Saudi Arabia’s trade figures for March showed that imports collapsed. We also estimate that private capital flows out of the Kingdom during the first month of the war might have been in the order of $10bn. Finally, Egypt’s central bank struck a markedly more hawkish tone at its meeting last Thursday, but high real interest rates mean the next move is still likely to be a cut.