Middle East tensions could push oil trade to $120 a barrel, hurting global GDP growth and sparking inflation fears
In its latest Global Economic Outlook (GEO) report, Fitch Ratings foresees an interesting scenario. He thinks higher-than-expected oil prices, driven by conflicts in the Middle East, may significantly impact global economic growth. Furthermore, the report suggests that oil prices can soar to $120 per barrel in 2024 and $100 per barrel in 2025, generating profits. This increase may be due to supply constraints linked to geopolitical tensions. Therefore, it could result in a 0.4 percentage point reduction in global GDP growth in 2024. As a result, the market will see 0.1 percentage point lower persistent growth in 2025.
The impact on GDP growth
The simulations, based on Oxford Economics’ global economic model, project different impacts on GDP growth in different economies. In particular, the negative impact on growth in 2024 ranges from 0.1 percentage points in Indonesia to a substantial 0.9 percentage points in Korea. Major economies such as the United States, the eurozone and Japan are estimated to experience impacts of 0.5 percentage points. Emerging market countries such as South Africa and Turkey could face significant impacts of 0.7 percentage points, while Russia and Brazil, which rely on oil production, would experience varying effects.
The report highlights the possible ripple effects of the refined oil shock. These include tighter financial conditions and lower business and consumer confidence. Furthermore, corrections in financial markets could also occur in a more severe scenario. In this case, the share price could decline by 10% in the first half of 2024. Major economies could face 0.5 to 0.9 percentage point lower GDP growth next year.
Oil price forum: impact on inflation
Higher oil prices are also expected to lead to elevated inflation rates in 2024. Turkey, India and Poland are expected to see the most substantial percentage point increases, while the United States anticipates inflation rates about 2 percentage points higher than those at the end of Projections for 2024. Brazil and Mexico emerge as exceptions and will face high inflation rates in 2025.
In a related development, US crude oil inventories rose more than expected, hitting a three-month high. According to data from the Energy Information Administration (EIA), US commercial crude oil inventories for the week ending November 10 increased 4% to 439.4 million barrels. While this was the highest inventory since August, it remained about 2% below the five-year average for this time of year.
Market Response to Crude Oil Trading
The potential impact of oil-induced headwinds is already reverberating through financial markets, emphasizing the interconnectedness of geopolitical events and global economic dynamics. Analysts are closely monitoring developments as concerns over tensions in the Middle East continue to influence oil markets and shape economic forecasts.
This news comes at a time when uncertainties surrounding oil trading add another layer of complexity to the post-pandemic economic recovery, leading market participants to reassess risk factors and adopt a vigilant stance on developments. geopolitical landscapes.
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