Four ways world events might affect your finances

The UK’s departure from the European Union has dominated headlines in recent years. No matter which side of the debate you’re on, it’s clear that the debate over the terms of the country’s departure from the EU has the power to destabilise the economy – especially given the failure for Parliament to agree a way forward.

The health of house prices, pensions and the stock markets all rest on finding an orderly answer to the current crisis. A delay until October 31 has at least taken the imminent threat of a ‘no deal’ Brexit off the table – meaning that a summer crash or holiday disruption should at least be postponed if not avoided. However, with the deadline extension being ‘flexible’, there could yet be a moment before October where the deadlock is broken.

Brexit is not the only challenge affecting the continent – there are other underlying issues to be addressed, not least among the countries where the Euro is used. Indeed, before Brexit many people feared the whole Eurozone project was at risk – with Greece requiring a series of bailouts to come through a debt crisis. The clash over the recent Italian budget and the rise of populist politicians, with the European Parliament elections on the horizon, could bring further conflict and make it hard to find a way to reform the Eurozone.

Further instability could bring turmoil to countries that are popular retirement and holiday hotspots but, more seriously, there’s a risk of contagion and what’s known as a ‘doom loop’. Banks across Europe are, according to Bloomberg, holding more than 425 billion euros of sovereign and private Italian, with 17.4 billion euros held in the UK with Barclays. Eurozone debt, therefore, is a problem for us all to consider and has the potential to spark domestic disruption in the same way that the American sub prime mortgage market sparked a crisis and recession over a decade ago.

When the world’s two biggest economic superpowers lock horns there’s bound to be a fallout. Donald Trump’s belligerence has caused him to enter into a conflict with China which many feel could become a full-blown trade war. The two powers have traded retaliatory tariffs so far, which have raised the price of goods as varied as plastics, fridges, railway equipment, coal, steel, soya beans, fruit, wine, whiskey, and pig products. If the conflict escalates further, the next batch of tariffs could ramp up prices for handbags, car tyres and even animal medicine.

The trade war might seem a distant conflict, but the impact on consumer prices is real.

The rivalry between Saudi Arabia and Iran is intensifying and is polarising an already volatile region in the world. The Economist’s Intelligence Unit notes this as one of the top ten risks to the global economy. It explained: “In the worst-case scenario, these proxy battles could lead to wider conflict in the Gulf region, potentially pitting Saudi Arabia and Iran directly against each other, shutting down the Strait of Hormuz and crippling global energy markets. In a period when we already expect global oil stockpiles to be falling, any disruption to supply from the Gulf would quickly translate into a surge in prices and would consequently hit global economic growth prospects severely.”

Whether it’s higher fuel and energy costs, the prospect of rising consumer prices, a threat to banking stability or economic uncertainty caused by political problems, the events of the news reach all of our pockets in the end.