ANALYSIS: Iran-Israel war adds uncertainty to rates, rand outlook.
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GUEST – Mamokete Lijane is global markets strategist at Standard Bank CIB.
The uncertainty in the growth outlook has increased this year and continues to rise. The new fear for the global economy is stagflation, that toxic economic environment in which low growth is paired with high inflation, making policy responses to economic crises impossible. The risk of such an outcome has increased with the intensification of the conflict between Iran and Israel in the Middle East.
The most recent war-inflicted global energy shock was in early 2022 when Russia invaded Ukraine. Oil prices climbed 75% between December 2021 and March 2022. A barrel of Brent now costs 25%, or $15, more in dollar terms than in May, with potential for even more escalation if the Israel-Iran war intensifies and threatens oil supply. In that case $90 per barrel doesn’t seem too far.
The uncertainty in the growth outlook has increased this year and continues to rise. The new fear for the global economy is stagflation, that toxic economic environment in which low growth is paired with high inflation, making policy responses to economic crises impossible. The risk of such an outcome has increased with the intensification of the conflict between Iran and Israel in the Middle East.
The most recent war-inflicted global energy shock was in early 2022 when Russia invaded Ukraine. Oil prices climbed 75% between December 2021 and March 2022. A barrel of Brent now costs 25%, or $15, more in dollar terms than in May, with potential for even more escalation if the Israel-Iran war intensifies and threatens oil supply. In that case $90 per barrel doesn’t seem too far.
