Finance chief says Hong Kong remains stable as oil prices surge amid global turmoil

Finance chief Paul Chan has vowed to monitor energy volatility as Middle East tensions drive up fuel costs worldwide.

Photo: Eugene Lee Hong Kong authorities are closely monitoring rising tensions in the Middle East and the resulting volatility in global oil prices, although the immediate impact on the city’s economy remains limited, the finance chief has said.

Financial Secretary Paul Chan Mo-po also said on Sunday that, while international investor sentiment had been shaken by geopolitical instability, the city’s financial markets continued to operate in an “orderly and smooth” manner, with capital flows remaining stable and “abundant”.

Chan acknowledged that the prolonged conflict in the Middle East, unstable international geopolitics, and the sharp rise in fuel prices were weighing heavily on the global economic outlook. “In the short term, the direct impact on Hong Kong is limited, as our economy is primarily service-driven and our goods exports to the Middle East account for a relatively low proportion [of total trade],” Chan wrote on his weekly blog. “In the medium term, should the conflict persist, it will inevitably impact the global macroeconomy, interest rate trajectories and capital flows.” The current volatility stems from February 28, when heightened hostilities in the Middle East – marked by joint US-Israeli strikes on Iranian infrastructure – sent global oil prices spiralling.

The impact was felt almost immediately in Hong Kong’s aviation sector, with flag carrier Cathay Pacific announcing last Thursday that it would raise fuel surcharges by 34 per cent across all flights starting in April – the second increase in two weeks.

Premium petrol prices at petrol stations also surged from an average of HK$17.57 to HK$20.17 (US$2) per litre after walk-in discounts within just four weeks, representing a 14.8 per cent increase. “Hong Kong’s energy supply remains relatively stable, underpinned by the strong support of the mainland,” Chan said.

While other countries have responded to the energy crisis with measures such as offering free public transport, cutting flight capacity, and adopting four-day work weeks to limit air conditioning use, Chan emphasised that Hong Kong would continue to closely monitor the situation.

Paul Chan says the short-term impact on Hong Kong’s economy remains limited.

Photo: Elson Li “Once fuel and energy costs rise, they could impose additional burdens on shipping, logistics and other sectors of the economy.

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