Why the market is plunging ? Coronovirus or a oil price war

Read Time: 3 mins

Today as we all see that the market is plunging by margins that none of us expected or are willing to believe. As in today's world, problems are solved on a global level due to globalization, so are the creation of problems. One problem leads to another and that leads to another thus creating a domino effect. This is a big reason why we are seeing such a drop in the market worldwide. Looking back at how 2020 started for us we can easily understand the domino effect.

Starting with the Trade war between US-China, then Israel-Palestine conflict, the death of Soleimani i.e. the US-Iran conflict, then CAA-NRC conflict in India, the climate issues addressed at Davos 2020, and the current pressing issues of Russia and OPEC oil pricing war and the pandemic Coronavirus, all these are the ripples that create a convolute path for the understanding of the downfall in the global market.

First, let's see what is the status of the global market and a few top companies.

The current issues that everyone knows, the oil price war and the decreased productivity due to COVID-19, are at the epicenter of this downfall. Now let's dive deep into what these issues are and what are they leading up to.

COVID-19

As we all are aware what coronavirus is, just FYI COVID-19 stands for COronavirus VIrus Disease - 2019, the virus is responsible for thousands of deaths and is declared a pandemic, today, by WHO. The travel restrictions, across countries and within cities have created a huge void in the work efficiency and the announcement of the travel ban, by the US president, today, is the major cause of this plunge in the stock market across the globe. Also, as China is known as the global manufacturer of all major products and e-devices, the unavailability of employees has led to slower production and thus low supplies. 

Russia-OPEC oil price war

First, let's see what OPEC is?

OPEC stands for the Organization of Petroleum Exporting Countries which was founded in Baghdad in 1960 by the first five members (Kuwait, Saudi Arabia, Iran, Iraq, and Venezuela). Currently, OPEC has 14 members:

• Saudi Arabia
• United Arab Emirates
• Iran
• Iraq
• Kuwait
• Nigeria
• Venezuela
• Libya
• Congo
• Algeria
• Angola
• Ecuador
• Equatorial Guinea
• Gabon

How the oil price war started?

The talk started between the OPEC kingpin Saudi Arabia and Russia and the talk descended into a dispute between the price of crude oil and each of them squeezing their profit margins in order to get more market share.

The inability of the group to conclude for the production policies and the oil prices led to a crash on Monday and then the news of WHO declaring Coronavirus as pandemic acted as a catalyst and led to further downfall. 

Is there a possibility of a recession?

Bloomberg Economics created a model that will help determine America’s recession odds. The possibility of a recession currently stands at 53% which is the highest since the Great Recession in and is significantly higher than the prior month which stood at 24%. The latest update by Bloomberg combines the February reports, monthly estimates for other figures which are not yet released, and the financial markets data from early March.

In short, these 2 are the major reasons behind the global downfall of the market and they might lead us into a recession but what the future holds for us is not known and is very uncertain but if the aforementioned problems persist for long then the percentage will definitely surge and we might fall into a recession.