According to the World Bank, the price of oil risks rising to $102 per barrel if a major conflict breaks out in the Middle East.
“An oil price shock of this magnitude could stop the fight against global inflation almost completely, according to the bank,” writes CNBC, which tells about the World Bank’s horror scenario.
In addition to an oil price above $100 a barrel and sharply rising inflation, interest rates would move further and remain high for a long time, according to the warning.
The Warning: “The World in a Vulnerable Moment”
“The world is in a vulnerable moment. A major energy shock could undermine much of the progress made in reducing inflation over the past two years,” says the World Bank’s chief economist Indermit Gill.
The background to this is, of course, the tensions between Iran and Israel, both of which have attacked each other with missiles and drones.
At the same time, the governments in Jerusalem and Tehran have signaled that they do not intend to escalate the conflict.
This has caused oil prices to fall recently, but the situation can change quickly in the Middle East as the situation is still uncertain, the World Bank believes.
Inflation not under control
In addition, global inflation is still not under control.
“A key factor in reducing inflation – falling commodity prices – has basically gone into the wall. This means that interest rates may remain higher than what is currently expected this year and next year,” says Indermit Gill.
On the oil market, what is happening in the Middle East is considered an upside risk, however, oil prices would ease if OPEC+ decides to wind down its production cuts this year, which would lower the oil price to an average of $81 per barrel, according to the World Bank, CNBC tells us.
Bank of America has previously warned that a war between Israel and Iran would send oil prices soaring by $30 to $40.
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