The ongoing conflict between Hamas and Israel could have dire consequences for the global economy, according to a top economist at Ernst & Young (EY), one of the world’s leading consulting and accounting services firms. Gregory Daco, the chief economist at EY-Parthenon, the global strategy consulting arm of Ernst & Young, has warned that if hostilities between the two parties continue to escalate, the world economy could suffer a severe blow.
In a worst-case scenario, Daco predicts that the expansion of military action in the Middle East would lead to a moderate recession, a significant drop in stock prices, and a staggering loss of $2 trillion. These consequences would have far-reaching implications for various sectors, impacting businesses, investors, and individuals alike.
Furthermore, the conflict is also expected to have a profound impact on oil prices. Daco suggests that if the tensions persist, the cost of oil could rise to $150 per barrel from the current price of $85. This increase in oil prices would not only affect consumers and businesses but also have wider implications for industries such as transportation and manufacturing.
The World Trade Organization (WTO) has also voiced concerns about the escalating conflict between Israel and Hamas. Last month, the WTO warned that if the world splits into two trading blocs as a result of the ongoing hostilities, global GDP could drop by 5% in the long term. Additionally, the WTO has revised its forecast for global trade growth in 2023, slashing it to 0.8% from the previously estimated 1.7%. This revision is attributed to a deepening manufacturing slowdown caused by the conflict.
The potential economic ramifications of the Hamas-Israel conflict highlight the interconnectedness of the global economy. As tensions between the two parties persist, the stability of financial markets, trade flows, and overall economic growth are at risk. Businesses and investors are closely monitoring the situation and bracing themselves for potential disruptions.
It is important to note that the consequences mentioned by Daco are not set in stone and represent a worst-case scenario. The ultimate severity of the economic impact will depend on various factors, including the duration and scale of the conflict, as well as the response of international actors.
In conclusion, the conflict between Hamas and Israel has the potential to deliver a significant blow to the global economy. With the possibility of a moderate recession, a decline in stock prices, and a loss of $2 trillion, the consequences are severe. Moreover, the rise in oil prices and the predicted drop in global trade growth further exacerbate the economic outlook. As the situation continues to unfold, all eyes are on the ongoing hostilities and their potential impact on the interconnected world economy.
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