Oil rises 16% YTD on Middle-East crisis: How will the fresh spike impact India and world markets—Explained
supply policy unchanged till the second half of 2024. The International Monetary Fund (IMF) has described an "adverse scenario" in which an escalation of conflict in the Middle East would lead to a 15 per cent jump in oil prices and higher shipping costs that would hike global inflation by about 0.7 percentage points. Global brokerages such as Morgan Stanley has lifted its third quarter Brent crude oil forecast by $4 per barrel to $94 .
Also Read: Iran's crude oil output up 20% in 2 years at 3.3% of global supply: What does this mean for the Iran-Israel proxy war? Oil was last above $100 in 2022. It briefly spiked to around $139 after Russia invaded Ukraine, its highest since 2008. The tightness in oil supplies, and higher prices, has been underpinned by oil producing group OPEC and other big oil producers curbing their output.
With oil prices expected to stay high, here's how the fresh spike will impact world markets: Inflation: Softening energy prices have been a principal driver of lower inflation expectations recently. Higher oil prices are seen as a threat to this trend. The latest US inflation print has cut back hopes of an early rate cut by the US Federal Reserve.
Coming to Europe, the European Central Bank (ECB) has a two per cent inflation target. ECB chief Christine Lagarde said that fresh turbulence in the Middle East had so far had little impact on commodity prices. Oil, while near recent highs, has eased a little this week.
Still, the ECB has said it is "very attentive" to the impact of oil, which can hurt economic growth and boost inflation. Zurich Insurance Group chief markets strategist Guy Miller said economies can survive, and producers are reasonably happy, when oil is around $75-$95 a barrel. "But
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