Oil prices surged on Monday, sparking a sharp sell-off in global stock markets amid mounting fears that the US-Israel conflict with Iran could trigger a worldwide economic shock. Economists warn that the crisis risks knocking growth and boosting prices, reviving fears of stagflation.
Though prices fell back on Tuesday after Donald Trump suggested the Middle East conflict could end “very soon”, oil continues to trade at elevated levels. The uncertainty has left markets on edge, with analysts predicting further volatility.
The war has caused an energy supply crisis that economists say could drive up inflation and interest rates. Growth is expected to weaken even as prices rise, a scenario reminiscent of the stagflation seen in the 1970s.
“The risk of stagflation is looming large,” noted one analyst, as the global economy faces the dual threat of slowing activity and rising costs. The situation remains fluid, with further escalations potentially deepening the economic impact.
