Oil prices could hit $150 Experts predict severe consequences of Israel-Hamas war

Fears that Israel’s expanding military operations in Gaza could escalate into a regional conflict are clouding the global economy’s outlook, threatening to dampen growth and reignite a rise in energy and food prices.

Rich and poor nations were just beginning to catch their breath after a three-year string of economic shocks that included the COVID-19 pandemic and Russia’s invasion of Ukraine. Stinging inflation has been dropping, oil prices have stabilized and predicted recessions have been avoided.

Now, some leading international financial institutions and private investors warn that the fragile recovery could turn bad, the News York Times reports.

“This is the first time that we’ve had two energy shocks at the same time,” said Indermit Gill, chief economist at the World Bank, referring to the impact of the wars in Ukraine and the Middle East on oil and gas prices.

“All of these things are happening all at the same time,” Mr. Gill said. “We are in one of the most fragile junctures for the world economy.”

Jerome H. Powell, the Federal Reserve chair, said on Wednesday that “it isn’t clear at this point that the conflict in the Middle East is on track to have significant economic effects” on the United States, but he added, “That doesn’t mean it isn’t incredibly important.”

“It’s a highly volatile, uncertain, scary situation,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University. But there is “a recognition among most of the parties, the U.S., Europe, Iran, other gulf countries,” he continued, referring to the Persian Gulf, “that it’s in no one’s interest for this conflict to significantly expand beyond Israel and Gaza.”

Gregory Daco, chief economist at EY-Parthenon, said a worst-case scenario in which the war broadened could cause oil prices to spike to $150 a barrel, from about $85 currently. “The global economic consequences of this scenario are severe,” he warned, citing a mild recession, a plunge in stock prices and a loss of $2 trillion for the global economy.