There are growing fears that the war in Israel will escalate and the US and Iran get more involved.
While the most pressing concern in Israel is the immediate human toll as thousands have died in the conflict with Hamas, the war also has a chance of disrupting the global economy.
In the latest estimates, more than 4,100 people have died since Hamas’ terrorist attacks earlier this month and Israel’s subsequent war against the militant group.
As the war in Israel rages on, there are growing fears it will escalate into something much bigger, and the ripple effect could undo any hopes for the US economy to avoid a recession.
International Monetary Fund managing director Kristalina Georgieva expressed concern on Thursday over how global oil markets would be impacted by the war. Specifically, if the US and Iran were to get more directly involved, there would be significant disruptions to oil supply.
This was echoed by Bloomberg Economics, who said the big fear for the global economy is if Israel ends up in direct conflict with Iran, which could pull the US more directly into the conflict. If that were to happen, they predict that oil prices would skyrocket more than 70% to $150 per barrel from just under $90 we have now.
An estimated 20-30% of global oil supply passes through the Strait of Hormuz, which is controlled by Iran. If Iran were to get directly involved in the war, there would be increased pressure for the US and other Western nations to increase sanctions on Iran, which could then turn around and close the strait, disrupting global oil supplies and elevating prices.
Bloomberg does not think the impact on oil prices would be as severe as the quadrupling seen during the “Oil Shock” in 1973 when Arab states imposed an embargo in retaliation for US support of Israel during the Yom Kippur War.
