QUESTION ONE

$[40]$

Global geopolitical tensions often play a pivotal role in shaping people$$s perceptions of

economic growth. Research shows concern about such issues can cause people and

businesses to become more cautious about spending and investing, which can ultimately lead

to economic recession.

The recent escalation of the Israel$-$Palestine conflict is no different. Investors around the world

are worried about the repercussions of this war $$ particularly in light of an already bleak picture

for global economic growth.

Internal and inter$-$state conflicts often have a significant effect on stock market indices,

exchange rates, and commodity prices $$ sometimes even sending prices higher in the leadup to hostilities. The longer$-$term economic impact is typically more complicated to assess,

however. The lasting effects of even seemingly dramatic events on investor behaviour can be

hard to predict.

This uncertainty is reflected in the risk premium in oil markets. This is the price paid for oil

traded ahead of time in the futures markets versus the real$-$time price of oil. It reflects the

profits that speculators expect to receive from buying and selling oil during a time of conflict,

as well as the hedging needs of businesses that produce and consume oil and their concerns

about supply and demand.

And so$,$ the effect of the latest Israel$-$Hamas conflict on global financial markets will depend

on the involvement of other major regional powers. If the conflict remains between Israel and

Hamas, the effect will probably be limited and arguably exclusive to countries with direct trade

exposure to Israel or Palestine.

But if the conflict spreads to major oil$-$producing nations in the region such as Iran, the global

economy could face severe repercussions as energy costs for businesses and households

could spike if supply is interrupted.

Higher energy prices would hamper central banks$$ efforts to tame inflation pressures in most

advanced and emerging economies. If this leads to a $$higher for longer$$ monetary policy that

keeps interest rates elevated, it would push up the cost of borrowing and refinancing by

governments, companies and people.

Under these circumstances, investors are already bracing for increased financial volatility

across the board $$ from stocks and government bonds to commodity markets. So$-$called safehaven assets like gold are typically used as protection against overwhelming economic

uncertainty. The price of gold has shot up following the latest escalation in the Israel$-$Palestine

conflict.

Financial markets will continue to monitor the conflict between Israel and Hamas for signs of

escalation. Anything that pushes oil prices up further will reignite fears of higher inflation.

$1\mathrm{.}1$

With reference to the case study above, and considering the statement made by the

South African President, that South Africa supports Palestine, evaluate the legal

environment South Africa may have to deal with in trading with Israel supporting

countries

$(40)$

Please note: additional research must be conducted. Note: it must be from credible sources

$($textbooks and journal articles$).$ All information must be paraphrased correctly, cited and

referenced accordingly $($if not, it will be considered as plagiarized$).$ Answers must be presented

in a suitable structured argument. The information must not include examples from the guide

as this does not align to the case study.

QUESTION TWO

$[30]$

$2\mathrm{.}1$

Differentiate between economic expansion and contraction. Providing evidence from

appropriate academic sources, identify if South Africa is currently experiencing an

expansion or contraction and motivate your answer.

$(15)$

$2\mathrm{.}2$

South Africa $($and the rest of the world$)$ is experiencing an energy crises. Analyse the

different types of innovations and provide a real world example of each $($related to the

energy crises$).$

$(15).$