Oil prices could soar to more than $150 a barrel if the conflict between Israel and Hamas widens into a crisis across the Middle East, the World Bank has warned.
It said the global economy, already grappling with the fall-out from the Ukraine war, could face a ‘dual energy shock for the first time in decades’.
‘An escalation of the latest conflict in the Middle East… could push global commodity markets into uncharted waters,’ the World Bank report said.
It was the first major assessment of the possible economic impact of the war, which would largely be reflected in a spike in oil prices.
That could mean knock-on effects for fuel and food prices, causing further pain, particularly for the globe’s poorest, reeling after Vladimir Putin’s attack on Ukraine reduced exports of grain from a major food-producing region.
Oil threat: The World Banks said the global economy, already grappling with the Ukraine war, could face a ‘dual energy shock for the first time in decades’
The report said that in a worst-case ‘large disruption’ scenario, on the scale of the Arab embargo on selling oil to the West in 1973, global supplies could shrink by 6m to 8m barrels per day.
That would drive prices up by 56 per cent to 75 per cent to between $140 and $157 a barrel, the World Bank said.
A ‘medium disruption’ – comparable to the Iraq war of 2003 – could cut output by 3m to 5m barrels a day and take the price to between $109 and $121.
And a ‘small disruption’ to supplies of 500,000 to 2m barrels a day could push prices to between $93 and $102. So far the impact has been ‘limited’, the report said.
Oil prices climbed to nearly $94 a barrel after the Hamas attack on Israel but have slipped to around $87 yesterday.
But the report said: ‘The outlook for commodity prices would darken quickly if the conflict were to escalate.’
World Bank chief economist Indermit Gill said: ‘The latest conflict comes on the heels of the biggest shock to commodity market since the 1970s – Russia’s war with Ukraine.
Policy makers will need to be vigilant.
‘If the conflict were to escalate, the global economy would face a dual energy shock for the first time in decades – not just from war in Ukraine but also from the Middle East.’
The International Monetary Fund’s chief economist Pierre-Olivier Gourinchas has said that if the war caused a 10 per cent rise in oil prices, it could lop 0.15 per cent off GDP growth next year and add 0.4 percentage points to global inflation.