The danger of Israel’s war in the Gaza Strip for the world economy is named: global recession

A war in the Middle East could trigger a global recession, Wall Street experts say. Their fears increase the risks associated with the Russian-Ukrainian conflict and the growing “probability of recession in Europe and the United States.”

Conflict in the Middle East could lead to a global recession as the humanitarian crisis deepens challenges facing an already fragile global economy, two of Wall Street’s biggest investors have warned.

The pessimistic comments come as the City of London braces for more gloomy news on the UK economy, with the Office for National Statistics due to provide an update on how it fared in the third quarter on Friday, The Guardian writes.

After growing marginally throughout 2023, the UK economy is expected to return to near-stagnation, city economists estimate. There’s also some disappointing new housing market data, with UK mortgage lending forecast to show its weakest growth in a decade during 2023 and 2024.

On the global economy, Larry Fink, chief executive of the world’s largest asset manager BlackRock, said the combination of Hamas’ Oct. 7 atrocities, Israel’s subsequent attack on Gaza and the outbreak of conflict in Ukraine last year had pushed the world “almost to a whole new future.”

In an interview with The Sunday Times, Fink said: “Geopolitical risk is a fundamental component that shapes all of our lives. We are experiencing growing fear around the world and less and less hope. Growing fear leads to a refusal to consume or an increase in spending. So fear breeds recessions over the long term, and if we continue to experience increasing fear, the likelihood of a European recession increases, and the likelihood of a US recession increases.”

Jamie Dimon, chairman of the largest US bank JP Morgan, also told the same newspaper that the combination of Israel’s war with Hamas and the conflict between Russia and Ukraine was “quite frightening and unpredictable.”

“What’s happening on the geopolitical front right now is the most important thing for the future of the world – freedom, democracy, food, energy, immigration,” he said.

The comments come three weeks after similar apocalyptic remarks from Dimon, who is one of the most famous financiers in the world. Last month he warned that this is “the most dangerous time the world has seen in decades”, with the escalating conflict potentially having “far-reaching consequences” for energy prices, food costs, international trade and diplomatic ties.

Wall Street’s negative sentiment about the global economy is echoing elsewhere. Last week, The Economist published an editorial entitled: “The global economy is defying gravity. This can’t go on forever.”

One reason the conflict between Israel and Hamas is seen as posing a global economic threat is the world’s dependence on the region’s oil, which accounts for a third of the market. Economists often worry that sharp increases in oil prices could trigger a global recession.

Weak economic performance means that the threat of recession is already looming over the UK. Last week the Bank of England said in its monetary policy report: “UK GDP is expected to remain unchanged in the third quarter of 2023, lower than forecast in the August report [Банка]. Some business surveys point to a slight contraction in output in the fourth quarter, but others are less pessimistic. GDP is expected to grow 0.1% in the fourth quarter, also weaker than previously forecast.”

Meanwhile, UK mortgage growth is expected to be at its lowest level for a decade in 2023 and 2024, the EY ITEM Club predicts. The economic forecaster expects mortgage loans in 2023 to grow 1.5% net in 2023 and 2% net in 2024, representing the lowest two-year growth in a decade. He blamed the sluggish market on high mortgage rates, slow economic growth and weakening housing market sentiment.

Anna Anthony, EY UK financial services managing partner, said the UK is “still on track to avoid a recession this year” but the economic situation remains challenging. “Significant cost of living pressures continue to impact households’ ability to spend money, with increasing numbers finding it difficult to keep up with loan repayments.”