Fitch Ratings is warning that the Israeli-Hamas conflict could still disrupt global oil supplies and negatively impact global oil growth in 2024.
In a new report the ratings agency released on Friday, it highlighted a potential scenario in which oil prices rise higher than expected, which would then go on to cut growth of the world gross domestic product (GDP) by 0.4% next year.
In its previous forecast, Fitch predicted oil would average $75 per barrel in 2024, before falling to $70 per barrel in 2025. However since the conflict erupted in the Middle East, Fitch now sees the global economy potentially following a different path. The agency said, “Our scenario assumes that, due to supply restrictions, oil prices average $120/bbl in 2024 and $100/bbl in 2025.”
Fitch wrote, “Higher oil prices would dampen GDP growth in almost all the Fitch 20 (economies it forecasts), although the impact would largely dissipate in 2025,” adding that the US, the Eurozone, and Japan would see their growth fall 0.5% in 2024.
Fitch noted the countries among the main emerging market nations would be South Africa and Türkiye.
The report noted, “Russia, and to a much lesser extent Brazil, would see a positive impact due to the important role of oil production in these economies.”
According to the ratings agency, if oil prices were to surge higher, it would cause higher than expected inflation rates in 2024, which would be followed by corrections in 2025. The effects of the inflation however would be short-lived according to Fitch, and would be offset in part by inflation rates in 2025 which would be lower-than-forecast.
Fitch concluded, “An oil price shock related to the Middle East conflict could be accompanied by tighter financial conditions, lower business and consumer confidence, and corrections in financial markets.”
The conflict in the Middle East began on October 7th, when armed militants from Hamas crossed the border with Gaza into Israel, and launched surprise terrorist attacks which killed more than 1,400 Israeli citizens, and saw over 100 more dragged back into Gaza as hostages. Since then the Israeli bombardments of Gaza have killed more than 10,000 residents, according to Palestinian authorities.
The biggest threat to the oil market, and by extension the global economy, is that the conflict should spread beyond Israel’s borders, and involve other oil-producing nations in the region, such as Iran.
