Analysts warn that the Middle Eastern war will affect global inflation and the economy through rising oil and gas prices, depending on the conflict's duration and intensity.
The ongoing war in the Middle East is expected to have significant repercussions on the global economy, particularly in terms of rising inflation driven by increased oil and gas prices. Analysts emphasize that the severity and duration of the conflict will determine the extent of these economic impacts. The uncertain environment, already complicated prior to the conflict, is expected to worsen as the situation evolves.
Neel Kashkari, the president of the Minneapolis Federal Reserve, highlighted during a conference in New York that given the current geopolitical events, the need for more data is critical to assess the full impact on inflation. He noted that it is still too early to evaluate how this conflict will influence both the inflation rates and the duration of its economic effects.
Two major financial institutions, Morgan Stanley and the Federal Reserve, are particularly concerned about potential supply disruptions, especially through the Strait of Hormuz. They have warned that prolonged interruptions could not only increase gas prices but also stoke consumer inflation and slow down household consumption. This potential energy supply shock might deter the Federal Reserve from increasing interest rates, possibly leading to a pause or reduction in rate hikes to stabilize the economy.
