Oil at $100 per barrel for a sustained period would dampen global economic growth and boost inflation, the European Development Bank forecast Thursday as the Middle East war pushes energy prices higher.
The European Bank for Reconstruction and Development — founded to help former Soviet bloc nations embrace free-market economies before extending its reach to the Middle East and Africa — noted that a 10-per cent increase in the average oil price is typically associated with a 0.1 percentage-point decline in global growth.
Since the start of the US-Israel conflict with Iran almost four weeks ago, the prices of benchmark oil contracts have soared around 40-45 per cent, with Brent North Sea crude trading above $105 Thursday.
“If oil remains above US$100 per barrel for a prolonged period and supply-chain disruptions involving chemicals and metals continue, global growth could be reduced by at least 0.4 percentage points, while inflation could rise by more than 1.5 percentage points,” the bank forecast.
“Economies with high energy import bills, strong trade and remittance links to the Gulf (are) particularly exposed.”
It added that the growth forecast for the EBRD regions is likely to be revised down by up to 0.4 percentage points when the bank updates its forecasts in June.
“The conflict shows how quickly geopolitical shocks can ripple through energy markets, supply chains and financial conditions,” said EBRD chief economist, Beata Javorcik.
“The broader fallout from the conflict is likely to strain government budgets already overstretched by high defence spending in central Europe and elevated debt-servicing costs in the southern and eastern Mediterranean and sub-Saharan Africa,” she added.
The Organization for Economic Cooperation and Development on Thursday maintained its global growth forecast at 2.9 per cent for 2026, even as it cut its outlook for Europe.
The OECD noted that global growth had been holding up “well” before the war and that it could have been 0.3 percentage points higher had the conflict not escalated.
The World Trade Organization chief, Ngozi Okonjo-Iweala, also warned as the WTO ministerial conference opened Thursday, that the global trading system is experiencing the “worst disruptions in the past 80 years”.
“The world order and the multilateral system we use to know has irrevocably changed,” she said, adding: “We cannot deny the scale of the problems confronting the world today.”
“The scale of the problems confronting the world today, even before the conflict in the Gulf, destabilised trade in energy, fertiliser and food,” Okonjo-Iweala said.
AFP
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