2002

Would a War With Iraq Impact the Industry?

Nov. 2002

Like everyone else in the world, we sincerely hope and pray that there will not be a war in the Middle East, and if there is one it will be very short and without major casualties. But if there is a war, it could have several effects on the diamond business.

It could impact production in Israel, as many members of the work force could be mobilized for active duty. It could also hurt demand. During wartime, people become more serious, more frugal and may not want to splurge on luxuries, although it’s possible there will be more engagements and marriages than in a peaceful year. And in an emergency scenario, people may not trust putting money in the banks, and will drift to "hard currency" like gold and diamonds.

Clearly, some of the ups and downs of the stock market may be related to the fear of war. But the volatility of the stock market has not really hurt the industry significantly, and there has only been a small drop-off in demand this year. This has not had much of an effect on prices. Diamond dealers don’t have to sell at basement prices and can hold on to inventory for a little while longer until they get their price, because they are more liquid and better financed than in the past.