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NewsRescue
Bloomberg stated this week that if Iran becomes engaged in the Israel-Palestine conflict, the world economy will enter a slump and oil prices would surge.
According to Bloomberg Economics, analysts see three possible outcomes for global growth and inflation: hostilities largely confined to Israel and the Palestinian territories, the conflict spreading to Lebanon and Syria, and a direct confrontation between Israel and Iran.
While all three scenarios are likely to produce an increase in oil prices, higher inflation, and slower global economic growth, analysts believe a full-fledged conflict between Iran and Israel would inflict the most harm.
“The wider the conflict spreads, the more its impact becomes global rather than regional… Conflict in the Middle East can send tremors through the world because the region is a crucial supplier of energy and a key shipping passageway,” they wrote.
In such case, oil prices may skyrocket to $150 per barrel. Global inflation is expected to rise to 6.7% in 2024, up from the current IMF prediction of 5.8%. Global growth is expected to fall by 1% from current predictions for next year, to 1.7%. This would be the worst figure since 1982, and it would cost the world economy nearly $1 trillion in monetary terms.
“If Iran decides to close the Strait of Hormuz, through which one-fifth of the world’s daily oil supplies pass, spare production capacity in Saudi Arabia and the UAE may not save the day.” There would also be a more significant risk-off shift in the market.
Analysts believe the impacts will be noticed immediately because many nations are currently dealing with inflation induced by the West’s Ukraine-related sanctions on Russia, which have reoriented global commerce, including oil and gas flows. They worry that another conflict in an energy-producing region might send the world economy into a slump.
According to Bloomberg, a direct battle between Iran and Israel is still “a low probability scenario.”
The fighting this month between the Palestinian militant group Hamas, which governs Gaza, and the Israel Defence Forces has already pushed up world gasoline prices. Brent crude futures for December delivery settled at $90.8 per barrel on Friday, up from around $84 per barrel the previous week.
