Israel signaled that a ground operation was imminent by asking the United Nations (UN) to withdraw its personnel from Northern Gaza. While tensions were rising in the field, Bloomberg economists studied three different war scenarios. According to Bloomberg Economics, in the worst-case scenario where Iran and Israel clash directly, oil prices could reach $150.
While efforts continue to prevent the Israel-Hamas war from spreading to different fronts in the Middle East, it seems almost inevitable that the global economy will enter a recession in the worst-case scenario.
Bloomberg Economics examined the impact of three different war scenarios on oil, global growth, inflation and market volatility. Market actors see a direct conflict between Iran and Israel as the worst-case scenario. According to Bloomberg Economics, this scenario could increase oil prices to $150 per barrel and $1 trillion could be erased from the global economy with a 1.7 percent contraction.
In the proxy war scenario, which includes the conflict spreading to Lebanon and Syria, economists’ expectations are for an 8-dollar increase in oil and an 8-point increase in the VIX index. In this scenario, Bloomberg Economics expects global growth to decrease by 0.3 percentage points and inflation to increase by 0.2 percentage points.
In the scenario of a ground operation in Gaza, limited regional conflict, and a decline in Iran’s oil production, economists expect oil to rise by $4 per barrel, global growth to fall by 0.1 percentage points, and inflation to increase by 0.1 percentage points.
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