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The Financial Times: Oil prices could reach $150 if the conflict between Israel and Hamas escalates, the World Bank has warned. In its quarterly Commodity Markets Review, the bank said a protracted conflict between Israel and Hamas could lead to significant increases in energy and food prices, which would be a “double shock” to commodity markets still reeling from the conflict in Ukraine.
“The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s — Russia’s war with Ukraine,” said Indermit Gill, the World Bank’s chief economist and senior vice president for development economics. According to the bank’s baseline forecast, commodity prices will fall 4.1 percent next year, with oil prices falling to an average of $81 a barrel from the $90 a barrel projected in the current quarter amid slowing economic growth.
However, according to the report’s authors, this forecast could change quickly if the conflict in the Middle East escalates. In a worst-case scenario, global oil supply could shrink by 6-8 million barrels per day, pushing prices up to $140-157 per barrel if leading Arab producers such as Saudi Arabia move to cut exports. In scenarios with small to medium disruptions, prices could reach $102 to $121 a barrel, the report said.
The World Bank said the global economy is in a better position to withstand a supply shock than it was in October 1973, when Arab OPEC members cut exports to the U.S. and other countries, leading to a fourfold increase in oil prices. However, it warned that commodity markets have yet to fully recover from the start of the SWO in February 2022.
“Policymakers will need to be vigilant,” said Gill. “If the conflict were to escalate, the global economy would face a dual energy shock for the first time in decades.”
The entire article can be read at the link https://www.ft.com/content/7fe07a25-9a76-4777-9178-c6756bb04c2f
