The World Bank warns that the Middle East war may cause a shock to oil prices

The World Bank warned on Monday that any major escalation in the war between Israel and Hamas – which has spilled over into a broader conflict in the Middle East – could cause oil prices to rise by up to 75 percent.

The potential for a global energy shock in the wake of Hamas’s brutal attack on Israel has been a pressing question for economists and policymakers, who have spent the past year trying to combat inflation.

Energy prices have remained largely under control since Hamas’s invasion of Israel on October 7. But economists and policymakers have been closely monitoring the course of the war and studying past conflicts in the region as they try to determine the potential scale of the economic fallout in the event of a current conflict. Intensifying and expanding throughout the Middle East.

The new World Bank study suggests that such a crisis could overlap with energy market disruptions already caused by Russia’s war in Ukraine, exacerbating the economic consequences.

“The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s — Russia’s war with Ukraine,” Indermeet Gill, World Bank chief economist and senior vice president for development economics, said in a statement. Accompany the report. “If the conflict escalates, the global economy will face a dual energy shock for the first time in decades – not only from the war in Ukraine but also from the Middle East.”

The World Bank expects global oil prices, currently hovering around $85 per barrel, to average $90 per barrel during this quarter. The organization had expected a decrease in next year, but the interruption of oil supplies could radically change these expectations.

The bank’s worst-case scenario is linked to the 1973 Arab oil embargo, which occurred during the Arab-Israeli war. Disabling this risk could remove up to eight million barrels of oil per day from the market and push prices up to $157 per barrel.

The less dangerous, but still devastating, outcome is for the war to continue as happened in the Iraq War in 2003, with oil supplies declining by five million barrels per day and prices rising by up to 35 percent, to $121 per barrel.

The more modest result is that the conflict will be parallel to the civil war in Libya in 2011, with the loss of two million barrels of oil per day from global markets and prices rising by up to 13%, to $102 per barrel.

World Bank officials warned that the effects on inflation and the global economy will depend on the duration of the conflict and how long oil prices remain high. They said that if high oil prices continue, this will lead to higher prices for food, industrial metals and gold.

The United States and Europe are trying to prevent global oil prices from rising in the wake of the Russian invasion of Ukraine. Western countries have imposed a price cap on Russian energy exports, a move aimed at limiting Moscow’s oil revenues while ensuring the continued flow of oil supplies.

The Biden administration has also used the country’s Strategic Petroleum Reserve to ease oil price pressures. A senior administration official told the New York Times last week that President Biden may authorize a new round of prisoner releases Sparean emergency stockpile of crude oil that is stored in underground salt caverns near the Gulf of Mexico.

Biden administration officials have publicly downplayed their concerns about the economic impact of the conflict, saying it is too early to predict the fallout. Treasury Secretary Janet L. Yellen noted at a Bloomberg News event last week that oil prices have been generally flat so far, and that she has not yet seen signs that the war is having global economic consequences.

“What might happen if the war expands?” Ms. Yellen said. “Of course there could be more meaningful consequences.”