The $108 Oil War: Can the Middle East Crash the World Economy?

Half a century ago, turmoil in the Middle East brought the global economy to its knees. Today, even as the region’s geopolitics grow more fractious, oil markets and central banks typically treat conflict as a shock to watch—not one that dictates the macro outlook. A 1970s-style energy crisis doesn’t look imminent. If it were to materialize, the consequences for inflation, growth and policy would be profound.

In this report, we present three broad paths for how Middle East shocks could play out—categorized by the expected response of oil markets—and assess their implications for the global economy. In the most extreme case, an escalation that hits energy infrastructure or key choke points would drive sustained price increases, reviving inflation risks and putting pressure on central banks to adopt a hawkish stance.