What the Israel-Hamas conflict could mean for inflation, oil prices

globalnews.ca:

With Israeli airstrikes marking thefifth day of escalating conflict between Israel and Hamas on Wednesday, experts are warning of rising oil prices and inflationary pressure as a potential consequence of the ongoing hostilities.

On Tuesday, the International Monetary Fund’s chief economist, Pierre-Olivier Gourinchas, said it’s “too early” to assess the impact on global economic growth from the days-old conflict.

But he said the IMF was “monitoring the situation closely” and noted the rise in oil prices when the conflict first began.

“We’ve seen that in previous crises and previous conflicts. And of course, this reflects the potential risk that there could be disruption either in production or transport of oil in the region,” he said.

Meanwhile, World Bank President Ajay Banga said Tuesday that the Israel-Hamas conflict is an unnecessary global economic shock that will make it harder for central banks to achieve soft landings —a slowdown that avoids a recession —in many economies if it spreads.

“It’s a humanitarian tragedy and it’s an economic shock we don’t need,” Banga told Reuters on the sidelines of the World Bank International Monetary Fund annual meetings in Morocco.

Central banks were “beginning to feel a little more confident that there was an opportunity for a soft landing, and this kind of just makes it harder,” Banga said.

Rory Johnston, the founder of online oil research firm Commodity Context, noted the impact of the conflict on oil prices was immediate.

“This (conflict) is bullish for oil prices,” he told Global News Wednesday. “The immediate short-term reaction, as we saw, was about a $3 or $4 increase in the price of global crude oil coming out of the weekend.”

Though the area doesn’t produce much oil, the