Arab News Japan

TOKYO: Financial Forecaster Oxford Economics says Iran’s recent attacks against Israel have raised the specter of an escalation of the ongoing conflict in Gaza, with the possibility of oil prices rising to the levels seen in the 1973 crisis.

Oxford Economics’ Middle East escalation scenario envisions a broadening of the conflict that draws in other major players, which could result in a sharp but short-lived spike in oil prices and a major hit to confidence and financial markets globally. 

“Oil price fluctuations have been remarkably benign through the conflict to date,” the report says. “But as a major oil producer and member of OPEC, Iran’s actions against Israel have made this escalation scenario more plausible.”

As a result, the predicted scenario sees oil prices reaching as high as $130 per barrel in the second quarter of this year and Oxford Economics says this is “a shock akin to that during the Yom Kippur War in 1973.”

However, such a shock is likely to be short-lived and the hit to financial markets would also be temporary, with a slight rise in the value of the dollar. However, there would still be a significant slowdown in global growth of around 0.5 percent. Once again, a quick recovery is envisioned, and the shock should be insignificant within a year.