The observation is not particularly empathetic and does not shine with its ethics, but the recent conflict in the Middle East is causing only slight decreases in stock markets so far. “This should not change as long as the conflict is limited to Israel and the Gaza Strip,” believes Martin Eichler, chief economist at BAK Economics. History has shown that local geopolitical conflicts and other exogenous shocks only cause temporary declines in stock markets. Thus, after the attacks on the World Trade Center or the wars in Iraq and Libya, stock prices experienced a sharp but short-lived decline. Twelve months after these events, global interest rates had already recovered to positive growth.
Faced with the tense situation in the Middle East, economists are currently only concerned about one thing: the price of oil. “So far, the situation in the Middle East has not spread to other countries, so the increase in oil prices has remained limited. As long as this situation persists, we do not expect significant consequences for the global economy,” says César Pérez Ruiz, Chief Investment Officer at Pictet Wealth Management. If the war between Israel and Hamas were, nevertheless, to escalate and notably spread to Iran, a country likely to possess nuclear weapons, this could not only cause the price of the world’s economic lubricant to explode but also to quickly and violently plunge the global economy. Martin Eichler from BAK fears that “an open war between several states would probably throw the already faltering global economy into a deep recession.”
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