The impact of the surge in energy prices on the global economy will depend on the extent of any disruption to energy flows, which remains highly uncertain. Europe and Asia are more exposed than the US. As things stand, the baseline scenario is one in which hostilities cease by end of April and the surge in energy prices mostly unwinds by year-end. Global GDP growth would slow, but most economies would avoid recession. In an adverse scenario, where the fighting lasts much longer and more significantly dents global energy supplies, sustained higher oil prices would push the global economy into stagflation. We think that interest rate cuts this year are now off the table. But only in the adverse scenario would we see broad-based rate hikes across the major central banks.
We've been briefing clients about the implications of the Iran War for the global economic outlook. Please get in touch if you'd like a meeting.
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