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War in the Middle East could send oil prices soaring to $140 a barrel and push the world to the brink of recession, says Ana Bootahead of economic research Allianz Handel.
Speaking to Kriti Gupta on Bloomberg Television, the Paris-based analyst estimated a 20% probability that such an outcome would occur, culminating in hostilities between Israel and Hamas – designated a terrorist group by the US and EU in a broad regional conflict that would come to a standstill. reduce crude oil inventories.
“Higher oil prices – that is the immediate impact,” she said on Friday, explaining how such a scenario would unfold. “We can expect oil prices to rise from $90 per barrel to $140 at a peak, and even $120 on average next year.”
Such projections point to a horror in the human costs and a nightmare for policymakers dealing with the consequences. Officials at last week’s International Monetary Fund meetings also delved into the potential impact of oil, and Christine Lagarde, head of the European Central Bank, highlighted the risk in a briefing to finance ministers last week.
“Clearly at this level of energy prices we understand that central banks will be much more wait-and-see before cutting rates,” Boata said, describing the outcome of faster inflation and even weaker economic growth. “That could put us in the recession scenario that some would have expected anyway in the base case.”
Global growth as a whole would slow to 2% – close to the threshold indicating contraction, Boata said. In the meantime, the threat of a fallout in the financial markets should not be underestimated.
“Risks for government bonds have increased, and that is the reality, because real interest rates are clearly much, much higher than growth,” Boata noted.
“One of the concerns of economists, and we all remember this very well, is the remake of the 2012 sovereign debt crisis in Europe – and not only in Europe, because even the US is very exposed to the increase in interest payments” , she says. said. “No one, like governments, actually has clear plans to adjust their public finances.”
Speaking to Kriti Gupta on Bloomberg Television, the Paris-based analyst estimated a 20% probability that such an outcome would occur, culminating in hostilities between Israel and Hamas – designated a terrorist group by the US and EU in a broad regional conflict that would come to a standstill. reduce crude oil inventories.
“Higher oil prices – that is the immediate impact,” she said on Friday, explaining how such a scenario would unfold. “We can expect oil prices to rise from $90 per barrel to $140 at a peak, and even $120 on average next year.”
Such projections point to a horror in the human costs and a nightmare for policymakers dealing with the consequences. Officials at last week’s International Monetary Fund meetings also delved into the potential impact of oil, and Christine Lagarde, head of the European Central Bank, highlighted the risk in a briefing to finance ministers last week.
“Clearly at this level of energy prices we understand that central banks will be much more wait-and-see before cutting rates,” Boata said, describing the outcome of faster inflation and even weaker economic growth. “That could put us in the recession scenario that some would have expected anyway in the base case.”
Global growth as a whole would slow to 2% – close to the threshold indicating contraction, Boata said. In the meantime, the threat of a fallout in the financial markets should not be underestimated.
“Risks for government bonds have increased, and that is the reality, because real interest rates are clearly much, much higher than growth,” Boata noted.
“One of the concerns of economists, and we all remember this very well, is the remake of the 2012 sovereign debt crisis in Europe – and not only in Europe, because even the US is very exposed to the increase in interest payments” , she says. said. “No one, like governments, actually has clear plans to adjust their public finances.”