After crashing in April, analysts expected a small rebound in pending home sales in May, but they didn’t.

Instead, sales tumbled 2.1% MoM…

Source: Bloomberg

That dragged the YoY change down 6.6% to a new record low…

Source: Bloomberg

“The market is at an interesting point with rising inventory and lower demand,” NAR Chief Economist Lawrence Yun said in a statement.

“Supply and demand movements suggest easing home price appreciation in upcoming months. Inevitably, more inventory in a job-creating economy will lead to greater home buying, especially when mortgage rates descend.”

Potential homebuyers are turned off by high selling prices, which hit a record $419,300 in May, although the market is gradually seeing a pickup in listings.

On a call with reporters last week, Yun noted optimistically that the supply of existing homes was up more than 18% from a year ago.

“Let’s wait to see if this leads to more home sales,” he said.

More problematically, the pending-sales figures tend to be a leading indicator of sales of previously owned homes, because houses typically go under contract a month or two before they’re sold.

Mounting evidence of a consumer slowdown is becoming undeniable for the Biden team, which has nothing but cheerleaded failed economic policies dubbed ‘Bidenomics’ ahead of the presidential elections this November. We have detailed the consumer downturn extensively, citing notes from Goldman, whose top analysts told clients earlier this week to begin shorting “our Middle-Income Consumer basket (GSXUMIDC).” 

It was only Wednesday that Cheerios cereal maker General Mills reported a dismal sales outlook as consumers pulled back on spending in the era of elevated supermarket prices. Now, drugstore chain Walgreens Boots Alliance Inc. has slashed its full-year earnings thanks to a “worse-than-expected” consumer environment. 

Walgreens revised its forecast range for full-year adjusted earnings to $2.80 to $2.95 per share from $3.20 to $3.35.

• Sees adjusted EPS $2.80 to $2.95, saw $3.20 to $3.35, estimate $3.20 (Bloomberg Consensus)

Adjusted earnings for the third quarter ending May 31 were 63 cents a share, worse than the 68 cents that Wall Street analysts tracked by Bloomberg estimated. Sales beat on the quarter, but investors focused on the dismal full-year guidance. 

Here’s a snapshot of the third quarter earnings (courtesy of Bloomberg):

• Adjusted EPS 63c, estimate 68c

• Sales $36.4 billion, estimate $35.81 billion

• International sales $5.73 billion, +2.8% y/y, estimate $5.72 billion

• US Retail Pharmacy Sales $28.50 billion, +2.3% y/y, estimate $28.04 billion

• US Healthcare Sales $2.13 billion, +7.6% y/y, estimate $2.13 billion

On slide 15 of the investor deck released with earnings, Walgreens blamed the worsening outlook for the year on “Worse-than-expected consumer environment driving higher promotional activity, negatively impacting retail margin.” 

“We continue to face a difficult operating environment, including persistent pressures on the US consumer and the impact of recent marketplace dynamics which have eroded pharmacy margins,” Chief Executive Officer Tim Wentworth said in a statement in response to the earnings report. 

Wentworth said, “Our results and outlook reflect these headwinds, despite solid performance in both our International and US Healthcare segments,” adding, “Informed by our strategic review, we are focused on improving our core business: retail pharmacy, which is central to the future of healthcare. We are addressing critical issues with urgency and working to unlock opportunities for growth.”

In an interview with The Wall Street Journal, CEO Wentworth said the drugstore chain plans major store closures nationwide. The chain has approximately 8,600 stores in the US, and the executive said the company has yet to provide a final number of locations to close. 

 In markets, if premarket losses of -21% hold, this will be the worst single day decline for Walgreens in 30 plus years of data via Bloomberg. 

Shares are set to crash to levels not seen since the mid-1990s. 

Here’s how Wall Street analysts are responding (courtesy of Bloomberg):

Evercore ISI, Elizabeth Anderson (in line, PT $17)

• Calls the results disappointing

• Says lowered guidance will raise investor questions about the run rate number for FY25

Leerink Partners, Michael Cherny (market perform)

• Says the outlook cut on the back of this quarter’s performance is not “overly shocking to us as the company now begins the next leg of its turnaround”

• Sees a “murky multi-year pathway” with persistent near-term challenges that will make creating a constructive case on the stock challenging

Bloomberg Intelligence, Jonathan Palmer

• Says Walgreens’ second reduction to fiscal 2024 guidance “underscores the challenges in its turnaround”

• “Modest Ebitda in US Healthcare is a minor positive, though the wait is on for a more meaningful strategic transaction”

The big theme here is that low-income and middle-class Americans are suffering. Goldman recently illustrated this with charts, which we highlighted in a note titled “Goldman Exposes Bidenomics Real-World Disconnect: Low-Income Americans Are Struggling With High Prices.”

Besides Goldman, corporate America as a whole is beginning to freak out about the pullback in spending.  

We suspect corporate America’s warnings about the consumer slowdown will grow louder as the fall elections approach.

Let’s not forget that consumerism is nearly 68% of GDP. And, if you’re wondering how a recession could form, all it takes is one incident in the Middle East to spike Brent crude over $100/bbl to create a shock (remember 2007/08).

While absolutely nobody cared about today’s final Q1 GDP print – which in 3 days will cover a quarter that is more than three months old – there were two notable things about the print: first, the headline number came in fractionally higher than last quarter’s downward revised print, printing at an annualized 1.4% increase, up from 1.3%. That was also right on top of estimates. Despite the slight upward revision to the final number, the 1.4% print was still the lowest since June 22 when the mini technical recession ended.

However, while the overall GDP print came in higher, the composition was decidedly uglier, with Personal Consumption unexpectedly sliding from a 2.0% annualized number to just 1.5% (and a big miss to the 2.0% expected).

This confirms what recent earnings reports from MCD, MMM, KO, POOL, and most recently, Walgreens, have made very clear (and why Goldman recently said to short the middle-income consumer): the US consumer, that pillar supporting 70% of GDP growth, is cracking.

Taking a closer look at the numbers, we find that the sharply reduced increase in consumer spending reflected an increase in services that was partly offset by a decrease in goods. Within services, the leading contributors to the increase were health care as well. In other words, soaring health insurance costs are “boosting” GDP once more.  Meanwhile, within goods, the leading contributors to the decrease were motor vehicles and parts as well as gasoline and other energy goods.

• The increase in housing investment was led by brokers’ commissions and other ownership transfer costs as well as new single-family housing construction.
• The decrease in inventory investment was led by decreases in wholesale trade and manufacturing.

In terms of contribution to the bottom line GDP, here are the key numbers:

• Personal consumption was responsible for 0.98% of the bottom line 1.41% GDP growth, a big drop from the 1.34% in the second estimate and almost half the 1.68% consumption in the first estimate!
• Fixed investment added 1.19% to the bottom line, up from 1.02% in the previous estimate.
• The change in private inventories was almost unchanged from the previous estimate, at -0.42%, up fractionally from -0.45%.
• Net trade (exports less imports) subtracted only 0.65%, a revision from the -0.89% in the previous estimate. With the dollar soaring, expect this number to plunge for the Q2 print.
• Finally, government consumption managed a modest increase, rising to 0.31%, up from 0.23%.

One final point: while certainly not relevant today, one day ahead of the latest core PCE print, the BEA reported that in Q1, prices rose slightly more than expected, with the GDP price index rising 3.1%, up from 3.0% and the core PCE up 3.7% vs 3.6% previously. Some more details from the report:

• Gross domestic purchases prices, the prices of goods and services purchased by U.S. residents, increased 3.1 percent in the first quarter after increasing 1.9 percent in the fourth quarter. Excluding food and energy, prices increased 3.3 percent after increasing 2.1 percent.
• Personal consumption expenditures (PCE) prices increased 3.4 percent in the first quarter after increasing 1.8 percent in the fourth quarter. Excluding food and energy, the PCE “core” price index increased 3.7 percent after increasing 2.0 percent.

Bottom line: the stagflationary pressures are rising, with growth about to dip into contraction especially as the consumer is now tapped out, while prices remains very sticky, and while tomorrow’s core PCE may show a modest drop due to a handful of technicalities we will discuss shortly, everyone knows that absent a huge recession (or depression) prices will just keep on ticking higher.

CDK Global informed auto dealers on Wednesday that it has managed to “bring a small initial test group” of dealers online. This announcement comes a little more than a week after a ransomware attack crippled the software company’s Dealer Management System (DMS), used by thousands of dealers nationwide. 

X user Car Dealership Guy posted a screenshot of the email CDK sent dealers early Wednesday evening. CDK said that once the “small initial test group” goes live on its DMS, it will then onboard other dealers. 

Dear Valued Customers,

Thank you for your continued partnership as we work together to get you back to business.

We have successfully brought a small initial test group of dealers live on the core DMS. Once validation is completed, we will then begin phasing in other dealerships on the core DMS (accounting, parts, service, sales F&I, user management and document management).

You will get an email notification from an official CDK representative and email address in the coming days with details on the phased approach.

BREAKING

CDK Global has *just* successfully restored system access to a small initial test group of dealers!

Huge milestone and hopefully the start of broader restoration.

Once validation is complete, they will begin phasing in other dealerships. pic.twitter.com/2J1PYaK90g

— Car Dealership Guy (@GuyDealership) June 26, 2024

CDK works with more than 15,000 auto dealers nationwide. Since the cyber incident was reported last Wednesday, many have grappled with disruptions.

Major auto dealers, including Sonic Automotive Group, Group 1 Automotive, AutoNation, Lithia Motors, and Asbury Automotive Group, have already filed disclosures with the US Securities and Exchange Commission about the cyber incident negatively impacting their business. 

Bloomberg reported that CDK was hacked by the cyber gang BlackSuit, which demanded millions of dollars. 

X users Car Dealership Guy reported on Tuesday that “Dealership outages will continue until at least June 30th.” 

A Mazda dealership in Seekonk, Massachusetts, told CNN earlier this week, “The financial impact it will directly have on us will take months to correct, if not years.”

The ongoing CDK outage forced many auto dealers to use pen and paper to complete transactions, while some closed their shops altogether. 

By Elwin de Groot, Head of Macro Strategy at Rabobank

Watch the flanks!

Last week, one day before the European Commission published its “Spring Package” in which it reprimanded seven Member States for flouting the budget rules, Hungary launched its Trump-inspired slogan for the upcoming 6-month European Council presidency starting 1 July: “Make Europe Great Again”. With that presidency spanning the US elections and its immediate aftermath, the irony of it wasn’t lost on some observers, especially when Hungarian EU Affair Minister János Bóka argued that “It actually shows manifest the expectation that together we should be stronger than individually but that we should be allowed to remain who we are when we come together. It also portrays the idea that Europe is able to become an independent global actor in our transforming world.” Of course, if anything, Hungary has more often than others acted as a stumbling block for more integration and projecting unity.

It the meantime, the good news is that there is now an agreement on who will get the top jobs in the EU following the elections for European Parliament earlier this month. Those elections showed a shift to the far-right (but not as much as feared by some) and losses at the Greens and particularly the Liberals. But the center (signified by the two biggest parties, the EPP and S&D) held better-than-expected. The political turbulence that followed has been largely of a national making rather than stemming from the direct consequences of the change in composition of the European Parliament.

Hence the quick decisions by the mainstream center parties to have their European ‘management team’ ready. As expected it will consist of Ursula von der Leyen as head of the European Commission President, former Portuguese PM Antonio Costa leading the Council (representing the national leaders) and Estonian PM Kaja Kallas in charge of EU foreign policy.

Hungary’s Viktor Orban hit out on X: “Instead of inclusion, it sows the seeds of division”. Italy’s PM Meloni has also objected to the quick decisions, arguing this team does not reflect the political shift observed in the election, but according to reports Italy has been promised an important post in the Commission. In contrast to Orban, perhaps, there is a strong case for keeping Meloni on board, as she more or less represents the moderate (or, at least, economically rational) voices among the extreme right parties in Europe. The heads of Parliament and the Council will only stay on for the first half of the 5-year parliamentary session and so that could serve as another carrot for the moderates on the right.

In our pre-election report we highlighted two risk scenarios in which the shift from the center towards the far-right could scupper the EU’s increasingly ambitious plans to strengthen its strategic autonomy. The first, and perhaps highest risk, is a form of ‘stasis’ that would make legislation in the next five years sluggish, preventing further integration and potentially leading to a slow but steady demise of Europe in an increasingly hostile (economic and military) environment. The other scenario we called ‘unbalanced policy’, for example due to excessive social spending or spending on non-productive sectors, leading to more inflation but not the desired long-term results.

However the thinking in this piece was that if the political shifts would not be too significant, the centre could still broadly agree with the strategic policy agenda and push through (some of) the required bold changes that would come with it. Yet it increasingly seems that the risks are not so much coming from the center of European power (the EU institutions) but – in football terms – from the flanks, represented by the national satellites (as represented by the Council).

The first example is of course the political turbulence in France since Macron called snap elections for 30 June and 7 July. However you slice and dice it, it is hard to see the center in France not losing ground after these elections. And in the past years President Macron has showed himself as being one of the staunchest supporters of European unity.

The second weak point may well turn out to be Germany. Yesterday we suggested that Germany’s intent to negotiate with China on reduced tariffs on European car imports in exchange for not pushing through the tariffs on Chinese EV’s announced by the EU could still backfire in the longer term, even if it were to bring relief for European car exporters in the near-term. But yesterday there was also further evidence that Germany has succeeded in taking joint financing for military spending in Europe, through ‘defense bonds’, off the table. According to Bloomberg, citing a draft EU strategy document, there is no longer any mentioning of joint borrowing. Instead, the bloc will use “innovative options” to finance an increase in defense spending. Whatever that means exactly is unclear but it’s not joint financing.

We have been arguing for some time that if Europe really wants to get its act together it should not shun more radical changes, including joint financing and the active involvement of European institutions, including the ECB. Further integration clearly has become more difficult with the political shifts in European Parliament and “Make Europe Great Again” coming from the EU’s enfant terrible may sound like a pretty incredible statement, but the biggest challenges right now are actually coming from the flanks of Europe.

Turning to the other side of the globe, Australia’s inflation rate rose to 4% in May, a more than expected increase (from 3.6% in April and with 3.8% expected by the consensus), driven by higher transport and housing costs. Last week the RBA kept rates on hold but warned that there is still a possibility that it may have to hike. Indeed, this piece of data supports our off-consensus view that the next step by the RBA is more likely to be a hike than a cut. Aussie dollar rose 0.4% against the US dollar, despite warnings from Michele Bowman that the Fed may have to keep rates elevated to contain upside risks to inflation.

As credit cards and digital wallets (e.g. Apple Pay, Paytm, Alipay) see increasing adoption around the world, the share of cash being used in transactions is plummeting.

The chart below, via Visual Capitalist’s Nick Routley, looks at cash as a share of transaction value in selected countries at three time periods (2019, 2023, and 2027P).

Highlighted in red is cash’s projected drop from 2019 to 2027.

This data showing the death of cash comes from WorldPay’s Global Payments Report 2024.

Where Cash is King (For Now)

The prominence of cash for use in transactions is dropping in every country measured. This includes countries where cash was preferential method of payment in POS transactions.

One clear example is Nigeria. In 2019, over 90% of transaction value was still in cash payments. That number has now fallen to 55% today. Cash is still the leading payment method in Nigeria and a handful of other nations, but current trends indicate this may not be the case for much longer. For now, cash also remains the leading method of payment in various South American and East Asian countries.

Below is a full list of countries included in the report, along with cash’s share of transaction value in those countries.

Where the Death of Cash is Already a Reality

In some places, cash payments are already a rarity. This includes Canada, New Zealand, Australia, and most Nordic countries.

The report predicts that France, Singapore, South Korea, the UK and the U.S. will fall below the 10% transaction value threshold for cash by 2027.

By RFE/RL Staff via OilPrice.com,

• On June 18, France announced the sale of 36 Caesar self-propelled howitzers to Armenia, leading to harsh criticism from Azerbaijan and Russia, highlighting the rising tensions in the Caucasus.

• Azerbaijani and Russian officials have labeled the arms sale as provocative, with fears of sparking a potential Third Karabakh War as regional hostilities persist.

• The transaction underscores the ongoing diplomatic feud between France and Azerbaijan, with France showing firm support for Armenia’s military strengthening and territorial integrity.

A cold conflict is escalating between France and Azerbaijan. And the latest twist in the tit-for-tat spat is heightening the prospect of renewed conflict in the Caucasus.

On June 18, French Defense Minister Sebastien Lecornu announced the sale of 36 Caesar self-propelled howitzers to Armenia. The move immediately sparked vitriolic responses from Azerbaijan and Russia. The Azerbaijani Defense Ministry called the sale as a “provocative” step that could revive the region as a “hotbed of war.”

Russian Foreign Ministry spokeswoman Maria Zakharova echoed the Azerbaijani narrative, saying that “Paris is provoking another round of armed confrontation in the South Caucasus, and they are doing it in different ways.” 

The Armenian Foreign Ministry brushed off the criticism, issuing a statement asserting that “it is the sovereign right of every country to have a combat-ready army equipped with modern military hardware.”

In recent days, Azerbaijan’s Defense Ministry has reported several instances in which Armenian forces allegedly fired on Azerbaijani positions along the two countries’ border. Yerevan has denied allegations of initiating any gunfire exchange. At the same time, reports appearing in state-connected media in Azerbaijan have hinted at the rising potential of renewed conflict; one commentary published June 22 by the official APA news agency raised the possibility of a “Third Karabakh War.”

“The Armenian leadership, which did not draw any conclusions from its successive defeats in the military and diplomatic fields, has begun to exhibit a non-constructive approach,” the APA commentary stated. It went on to single out France as provoking confrontation in the Caucasus.

“In the 21st century, France, which still has the status of a shameful neo-colonial state, is trying to play the provocateur role it plays on a global scale, in the processes in the South Caucasus region,” according to APA.

As the APA statement highlights, Azerbaijan’s sharp response is connected to Baku’s deep antipathy for France, rooted in Paris’ strong support for Armenia throughout the three-decade struggle for control of Nagorno-Karabakh, a conflict that ended late last year with Azerbaijan’s decisive defeat of Armenian forces and the cleansing of Karabakh’s ethnic Armenian population.

The reaction is also linked to a chain of events since the start of 2024, in which France and Azerbaijan have taken turns antagonizing each other. In March, for example, French president Emmanuel Macron welcomed Armenian Prime Minister Nikol Pashinyan in Paris, offering unambiguous political backing for Armenia’s territorial integrity and its efforts to improve relations with the West. 

Resenting what it perceived as further meddling in the Karabakh peace process, Azerbaijan reportedly helped stir up independence sentiment that led to violent protests in May in the French Pacific colony of New Caledonia. Baku denied French allegations of involvement, but Azerbaijani media outlets did start assailing France’s “neo-colonial” behavior. 

Azerbaijani President Ilham Aliyev appeared to take a backhanded swipe at France earlier in June when he raised the possibility of Azerbaijan creating a development fund to help small island nations.

The howitzer sale can be seen as France clapping back at Baku. But a feud that has been up to this point limited mainly to verbal sniping now has reached a point where, if not managed well, it could prompt actual bullets to start flying again in the Caucasus.

Eurasianet.org

The United Arab Emirates is set to attract the most millionaires in 2024, while China and the UK are expected to lose the largest number of high-net-worth individuals (HNWIs).

This graphic, via Visual Capitalist’s Marcus Lu, shows the top 10 countries projected to have the highest net inflows or net outflows of HNWIs in 2024. HNWIs have a liquid investable wealth of $1 million or more. All figures come from the Henley Private Wealth Migration Report 2024.

Why is Attracting Millionaires Important?

According to Henley & Partners, 20% of HWNIs are entrepreneurs (rising to 60% for centi-millionaires and billionaires). As a result, countries that attract HWNIs from other parts of the world may see powerful benefits like job creation and investment.

Countries Attracting the Most Millionaires in 2024

The UAE’s strategic focus on economic diversification and government investment has positioned it as a global economic powerhouse.

The country has seen significant investments in tourism, real estate, logistics, financial services, and technology markets.

In addition, the adoption of international standards in regulatory and market frameworks, coupled with attractive tax initiatives, has drawn young entrepreneurs worldwide to the country.

According to Warwick Legal Network, the UAE accounts for over 30% of foreign direct investment inflow to the MENA region.

Countries Losing the Most Millionaires in 2024

Meanwhile, uncertainty over China’s economic trajectory and geopolitical tensions have led millionaires to leave the country. China saw the world’s biggest outflow of high-net-worth individuals last year and is expected to see a record exodus of 15,200 in 2024.

Similarly, the UK is expected to lose 9,500 millionaires this year, on top of the 16,500 millionaires it lost in the six-year period following Brexit.

This is an interesting and noteworthy reversal in fortune, since historically, the UK has drawn wealthy families from Europe, Africa, Asia, and the Middle East.

Via Middle East Eye

While many Muslim-majority states have condemned Israel for the conduct of its war in Gaza, Azerbaijan stands out for its relative quiet. Baku, which will soon attract more global attention as it prepares to host Cop29 in November, has long enjoyed closer ties to Israel than many of its near neighbors. In recent years, the friendship has blossomed further.

Israel is now the top destination for Azeri crude oil, while key weaponry for Baku’s victory in the 2020 Nagorno-Karabakh war was supplied by Israel. But ties are driven by more than just material benefits, with shared geopolitical concerns, especially regarding Iran, further oiling the relationship.

Israel calls Azerbaijan a “strategic partner“, enjoying close historical ties. When Azerbaijan declared independence in 1991, Israel was one of the first states to recognise the new state. A small Jewish community in Azerbaijan, of between 7,000 and 16,000 people, ensures a cultural connection, but the political relationship has been the priority.

Benjamin Netanyahu became the first Israeli premier to visit Azerbaijan, in 1997, and since then trade and security cooperation has increased. By the mid-2000s, Azerbaijan had become Israel’s fifth-largest trading partner, with oil headed to the eastern Mediterranean and weaponry and other military material headed to the Caspian Sea.

Today, Azerbaijan, alongside Kazakhstan, supplies 60 percent of the crude oil Israel uses.  

No criticism of Israel

Israel believes that having a Muslim-majority state as a partner might reduce its diplomatic isolation in the Muslim world. This has been particularly pronounced since the Gaza war began.

While most Muslim-majority states have been vocal in their criticism, the government of Azerbaijani President Ilham Aliyev has been surprisingly quiet. Aliyev met Israeli President Isaac Herzog on the sidelines of the Munich Security Conference in February, and there has been no outpouring of public criticism of Israel since the Gaza war began.

Baku-based journalist and analyst, Rovshan Mammadli, even reports a “de facto ban on protests against Israel” by Aliyev’s authoritarian government. 

Baku is not unconcerned with the suffering of the Palestinians. It recognizes Palestine and hosts a Palestinian embassy. It has been a vocal supporter of the two-state solution and, since the war broke out, supported UN resolutions calling for ceasefires.

But there has been a conscious balance to Baku’s line: expressing sympathy for the Palestinians without excessively criticizing Israel. For Baku, Gaza falls behind more proximate concerns, for which Israel has proven a useful ally.

The first is the conflict with neighboring Armenia. Having provided Baku with key weaponry to defeat Armenia in the Nagorno-Karabakh war of 2020, Israel has deepened its military partnership with Azerbaijan since then. Intelligence sharing between the two states has increased, while Israel has provided modern drone technology. Israeli companies have also rushed to invest in rebuilding Nagorno-Karabakh.

Israel’s support in the 2020 war was tied to Azerbaijan’s second proximate concern: its neighbor to the south, Iran.

Tehran backed Armenia in its decades-long conflict with Azerbaijan, despite it being a Christian-majority state fighting a fellow Muslim-majority state. This has contributed to frosty relations between Tehran and Baku and helps partly explain why Aliyev has been happy to forge ties with Iran’s long-standing rival, Israel.

The mutual hostility has even seen Iran backing Islamist groups in Azerbaijan, and Baku to encourage Iranian Azeris to push for separatism, without much success. Rather like its quiet support for some Kurdish groups in Iraq, Israel sees the value of supporting strong anti-Tehran forces on Iran’s border.

‘New chapter’

That said, Armenia’s defeats in 2020 and the collapse of Armenian Nagorno-Karabakh in 2023 have changed Tehran’s calculus somewhat. Immediately after the war, it mobilized troops along the Caucasus border as a means to deter Azerbaijan from pushing deeper into Armenia to connect with its non-contiguous province, Nakhchivan.

Since then, Tehran has adopted less aggressive methods: concluding an agreement last year to allow Azerbaijan access to Nakhchivan through Iranian territory, to temper its ambitions of conquering Armenia’s “Zangezur Corridor”.  They have also endorsed the possibility of a new rail link between Russia and India, via Iranian and Azeri territory, while officials have spoken of a “new chapter” in Baku-Tehran relations.

This might not erase the decades of tensions between the two neighbors, nor prompt Baku to halt its ties to Israel. However, Tehran may hope that if Baku feels less threatened by Iran, it will ease its closeness to Israel over time.

A more immediate source of strain on Israeli-Azeri ties, however, concerns Turkey. Far more than Israel, Turkey is Azerbaijan’s closest ally. Aliyev’s father and predecessor as president even described the relationship with their Turkic brethren as, “one nation, two states”.

Azerbaijan ordered the Sky Dew observational system from Israel. Sky Dew detects drones and missiles and was jointly developed by the US and Israel.

AZ state media notes that use of the Sky Dew will reduce AZ’s monitoring costs. pic.twitter.com/KYOPcXsC8r

— Lindsey Snell (@LindseySnell) March 13, 2024

In 2020, Ankara provided key weaponry, though less than Israel, but also helped train Azerbaijan’s military and provided Syrian militiamen to fight in Nagorno-Karabakh. In contrast to Aliyev, Turkey’s president, Recep Tayyip Erdogan, has been vocally critical of Israel since the start of the Gaza conflict. Israel and Turkey have recalled their diplomats, while Erdogan has severed some trade deals. 

Michael Rubin of the American Enterprise Institute hypothesizes that Erdogan’s anger at Israel might ultimately “doom” Azerbaijani-Israeli ties, with the Turkish president demanding its ally respond more forcefully over Gaza.

However, while this is a possibility given Ankara’s importance to Baku, Israeli-Azeri ties are now deep and historical and Azerbaijan would be reluctant to give them up, even in the face of Turkish pressure. Baku will probably hope that a ceasefire is announced before any such pressure from Ankara emerges, allowing it to continue its close, quiet relationship with Israel under less scrutiny. 

Sunny Verghese, CEO of Olam Agri, a Singapore-based agricultural trading firm, spoke at the Redburn Atlantic and Rothschild consumer conference last week, warned the audience that the world is heading towards a period of “food wars” as geopolitical wildfires spread across the globe. 

“We have fought many wars over oil. We will fight bigger wars over food and water,” Verghese said, quoted by the Financial Times, adding that food protectionism has forced some governments to boost domestic food supplies, exacerbating food inflation.

He pointed out that a surge in non-tariff trade barriers in 2022 in response to the war in Ukraine—1,266 from 154 countries by his count—had sparked “an exaggerated demand-supply imbalance.” 

Food prices have soared in recent years, whether due to adverse weather conditions (sparked by El Nino) or the war in Ukraine. These prices are likely to remain elevated for years to come.

Verghese said wealthier countries have been building surpluses of strategic commodities due to global uncertainty, which has helped push food prices higher.

“India, China, everybody has got buffer stocks,” he said, adding, “That is only exacerbating the global problem.” 

The latest data from the Food and Agriculture Organization of the United Nations shows that global food prices are beginning to rise once again and remain well above pre-Covid levels. 

What’s clear is that the most impoverished countries are extremely vulnerable to surging food prices and shortages, and these areas are at the highest risk of social unrest.

However, wealthier economies aren’t immune, as we’ve seen evidence with US consumers pulling back on food spending while complaining about the failure of Bidenomics.

FT provided two recent examples of food protectionism that is likely to continue in the years ahead, exacerbating food security risks for the world’s most vulnerable: 

In 2022, Indonesia banned palm oil exports to protect the local market while last year India imposed export restrictions on certain types of rice in an effort to curb rising domestic prices ahead of parliamentary elections, after a volatile monsoon disrupted production and spurred fears of a supply shortage.

The risks are skewed toward more food export curbs as the world splinters into a multipolar state full of conflict and chaos. Protectionism might be the worst thing for food security and yet another reason why prices will linger at elevated levels for the years to come.

This is yet more evidence that Americans need to ditch Walmart and the food-industrial complex and support local farmers so they can beef up local supply chains to minimize risks abroad.