Global Recession Risk Looms as Iran War Strains Oil Markets, Economists Warn
Top economists warn that the global economy faces recession risk if the Iran war disrupts oil supply for another 4-8 weeks, with higher energy prices already eroding consumer purchasing power and offsetting recent tax cuts.
Time Is Running Out
The countdown is on: The global economy has four weeks, eight at most, if it is to avoid plunging into a recession. That's the warning from Mohamed El-Erian, the former CEO of Pimco, who served as chair of President Obama's Global Development Council. El-Erian said the globe will "avoid a recession, provided—and here's the important thing—provided the straits are reopened in the next four to eight weeks. If they're not reopened in the next four to eight weeks, it will look very different."
Tax Cuts Offset by Oil Prices
Research from Goldman Sachs and Morgan Stanley both found that the Iran war's knock-on effect on oil prices has almost entirely canceled out the biggest consumer tax windfall in years, and for lower-income Americans, the ledger may be in the red. "Even if the Iran war winds down and oil prices recede quickly, the fallout will ensure there is no GDP pickup or job growth this year. Unemployment will rise further, and already considerable recession risks will worsen," Zandi added.
Supply Chain Disruptions Emerging
Williams said that "notable" supply-chain disruptions have already emerged, echoing the severe shortages and global supply disruptions experienced in 2021.