Good morning.

Tunisia’s second-round voting had a similarly low turnout as the first round making it unclear what will happen next. Recent attacks in Israel, Palestine, and Iran signal a period of heightened tension that feels poised to boil over.

Meanwhile, Czech voters clearly returned formed NATO General Pavel with 58% of the vote, signaling their preference to remain aligned with the West. On a (hopefully) positive note, China’s CDC declared that the current wave of COVID infections was coming to an end. 

No Clarity in Tunisia After 2nd Round of Voting

Tunisia’s run-off election this weekend saw only around 11% of voters turn out after opposition parties called for Tunisians to boycott the election. This was a similarly low number as in the first round of voting in late 2022. This leaves Tunisia with a weak parliament, a President with no clear mandate, and high levels of tension as prices rise and goods become more scarce.

Last week, Moody’s downgraded Tunisia’s credit rating due to the poor state of the country’s governance, adding to the country’s difficulties.

“Moody’s said the downgrade represents a deterioration of governance in the face of growing social constraints. The pessimistic view captures adverse risks associated with more delays in securing and executing a supported IMF policy, a government-specified target.”

Forbes Middle East Reporting 

What happens next in Tunisia is unclear until President Saied responds to the results. Read Reuters for more

Former NATO General Pavel Wins in Czech Elections

Retired General Petr Pavel won the presidential election in the Czech Republic this week with over 58% of the vote, clearly signaling the Czech people’s desire to retain strong ties with the west. A win for his opponent, Andrej Babis, would have continued the country’s turn toward Beijing and Moscow, adding considerable strain to the EU and Western coalition, particularly with respect to the opposition to Russia’s invasion of Ukraine. More in Reuters

Chian’s CDC Announces ‘End’ of COVID Wave

Chian’s Center for Disease Control and Prevention (CDC) announced that the wave of COVID infections that tore through the country after tight restrictions were lifted in December was “coming to an end”. This is despite the huge number of people who had traveled around the country during the Lunar New Year celebrations. China has been criticized for the accuracy of its COVID reporting and Lunar New Year was only a week or so ago but if this wave is coming to and end, the country will be on track for an economic resurgence starting in mid-February. Expect oil and raw material prices to respond as demand increases, but extra demand may have already been priced in, so fluctuation may not be as great as was previously expected. See the BBC for more. 

Attacks in Israel, Palestine and Iran

In the last week, there have been multiple Israeli raids into the Palestinian West Bank, resulting in multiple deaths and leaving many others homeless. In Gaza, Israeli jets retaliated after rocket attacks hit southern Israel. And in Jerusalem, two separate attacks on Friday and Saturday left seven Israelis dead and two others wounded. Meanwhile, a weekend attack on munitions and missile factories in Isfahan, central Iran, was blamed on Israel.

A video still reportedly of the attack on Isfahan, Iran. Photo, West Asia News Agency, via Reuters

It would be very easy to ignore this as the ‘same old’ regional back and forth, or to get sucked into the usual arguments about who started it and fight over nomenclature. However, none of that solves these complex problems and overlooks the fact this seems to be a time of particular tension with a hard-line government in Jerusalem, a weak Palestinian Authority, and a government in Tehran looking for an excuse to divert attention away from a domestic uprising.

The chance of further escalation appears very high as does the potential for a retaliatory attack by Iran on Israeli interests elsewhere.

On to the numbers

(Still not sure of how to use these metrics in your risk analysis? There’s a cheat sheet at the bottom of the email but the user’s guide is here. Want to know more? Read the white paper.)

Relative Values (90-Days)

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Trends (21-days)

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Evaluation

(Note: I’m dropping the daily commentary on the metrics as a few people said this was repetitive if things haven’t changed. I’ll add anything new or worthwhile in the daily emails. Otherwise, these will just appear in an end-of-week round-up on Fridays. Disagree? Hit reply and let me know.)

Brent Crude

Potentially impacting: Fuel prices | Gound shipping costs. | Plastic prices | Changes to fuel subsidies (potentially leading to unrest) | Cost of living (especially transport and heating) | Changes to traffic volume/transportation choices | Demand for automotive products | Theft and smuggling.

(No change) Brent Crude remains mid-range for this 90-day interval. Prices increased moderately over the last 21 days after significant fluctuation.

Iron and Steel

Potentially impacting: Cost of construction projects | Construction project timelines | Cost/availability of raw materials | Infrastructure project timelines/costs | Cost and availability of finished metal goods | Value of scrap | Value of 2nd hand equipment/vehicles.

(No change) Iron and Steel remain very high for this 90-day interval. Prices increased moderately over the last 21 days after slight fluctuation and continue to creep up. (Note that the Iron and Steel index is on the Taiwanese exchange, which is closed for lunar New Year so these values are from January 17.)

Market Volatility (VIX-US)

Potentially impacting: Availability of capital for investment | Interest rates| Share prices | Consumer confidence | House prices/rent | Financial certainty/uncertainty | Financial models | Stock-based compensation values.

(No Change) Market Volatility (VIX) remains very low for this 90-day interval. The index decreased sharply over the last 21 days after significant fluctuation.

Wheat

Potentially impacting: Bread, pasta, couscous & noodle prices | Changes to food subsidies (potentially leading to unrest) | Cost of living | Movement from low-income to food insecure to undernourished | Increased theft or graft in loosely governed areas | Demand on charities.

Wheat has moved into the high range for this 90-day interval. Prices increased moderately over the last 21 days after moderate fluctuation.

Ocean Freight (FBX)

Potentially impacting: Supply chain costs (direct and indirect) | Supply chain delays | Port capacity/throughput speed | Customs clearance | Availability of goods and materials | Consumer demand/hoarding.

Shipping (FBX) is very low for this 90-day interval. Prices ended relatively flat over the last 21 days after some fluctuation.

Up-to-date shipping data supplied by our partner Freightos

Election Watch

February 5: Cyprus, PresidentFebruary 5: Monaco, ParliamentFebruary 5: Ecuador, ReferendumFebruary 25: Nigeria, President, House of Representatives and SenateTurkey’s elections have been brought forward to May 14.

Palate Cleanser

Panda keeper: best job in the world or worst job? You watch and decide.

Video via China.org.cn

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