The Head of Economic Research at Allianz Trade, Ana Boata, has warned that oil prices could hit $140 per barrel by 2024 if the Middle East conflict persists.
When speaking to Bloomberg Television, Ana noted that if the ongoing conflict between Israel and Hamas spirals into a regional conflict, it would lead to the shutdown of crude oil supplies.
Speaking to Bloomberg TV’s Kripti Gupta, she noted that higher oil prices would be the direct impact of the continued conflict.
What she said
- “We can expect oil prices to go up from $90 per barrel to $140 at a peak, and even $120 on average next year.”
- She added that a situation like this would lead to faster inflation and weaker economic growth. In the worst cases, some countries might even experience a recession.
- “Clearly at these levels of energy prices, we understand that central banks would be much more into the wait-and-see mode before they cut interest rates
- “That could shift us into the recession scenario that some would have expected anyhow in the baseline scenario.
Boata further noted that the scenario could grind the global economy to a standstill, with growth slowing to around 2%, edging close to the mark that suggests economic contraction. She also spoke on the possible effect on the global financial market.
- “Sovereign risks have increased, and that’s a reality because real interest rates are clearly much, much higher than growth.
- “One of the concerns of the economists, and we all remember it very well, is the remake of the 2012 sovereign crisis in Europe — and not only in Europe, because even the US is very exposed to the increase in interest payments.”
What you should know
Since the announcement of oil production cuts by Saudi Arabia and Russia in September, oil prices have experienced a surge, as oil demand trends remained strong.
Towards the end of September, Brent Crude was trading for $94 per barrel, however, it began to slide down at the start of October.
As tensions began to escalate in the Middle East, oil prices began an upward swing, with Brent Crude trading in the $93 region, the highest since September 27.
