Latin America Relatively Insulated from Red Sea Trade Disruptions, But Still Vulnerable to Energy Price Spike

• If the Israel-Hamas war were to expand into a regional conflict and have a meaningful impact on global oil prices, it would place pressure on inflation rates in Latin America and likely delay or reverse rate-cutting cycles.
• However, compared to other regions of the world, Fitch believes that Latin America is relatively insulated from the impacts of the ongoing disruptions to trade in the Red Sea. 
• This is so, as virtually none of the region’s trade travels through the Suez Canal or the Red Sea, as its major partners – the US, Europe, and Mainland China – are directly accessible across the Atlantic and Pacific oceans.
• Notwithstanding, Latin America is vulnerable to a spike in oil prices due to a potential regionalisation of the Israel-Hamas war. Furthermore, if a spike in oil prices were to happen, Latin America, like every other region in the world, would see a notable inflationary impact.
• Finally, Fitch does not expect much of a political impact in Latin America from the conflicts in the Middle East, despite divisions over the Israel-Hamas war.

(Source: Fitch Solutions)