“All these things are happening at the same time,” Mr. Gill said. “We are in one of the most critical periods for the world economy.”
Mr Gill’s assessment matches that of other analysts. JPMorgan Chase Chief Executive Jamie Dimon said last month that “this may be the most dangerous time the world has seen in decades,” and described the conflict in Gaza as “the highest and most important thing for the Western world.”
Recent economic troubles have been exacerbated by deepening geopolitical conflicts spanning continents. Tensions between the United States and China over technology transfer and security only complicate efforts to work together on other problems such as climate change, debt relief or violent regional conflicts.
Excessive political engagement also means that traditional monetary and fiscal tools such as adjusting interest rates or government spending may be less effective.
The brutal fighting between Israel and Hamas has already taken the lives of thousands of civilians and caused immense suffering to both sides. However, if the conflict remains contained, the impact on the world economy is likely to be limited, most analysts agree.
Federal Reserve Chairman Jerome H. Powell said on Wednesday that “it is not clear at this point that the conflict in the Middle East is on track to have a significant economic impact on the United States”, but he added, “That does not mean That it’s not incredibly important.”
Middle East oil producers do not dominate the market as they did in the 1970s, when Arab countries drastically cut production after a coalition led by Egypt and Syria attacked Israel and the United States and some Other countries were banned.
“This is an extremely volatile, uncertain, scary situation,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University. But “there is a recognition among most parties, the US, Europe, Iran, other Gulf states,” he added, referring to the Persian Gulf, “that it is in no one’s interest to expand this conflict beyond Israel and Gaza ” ,
Mr. Bordoff said missteps, poor communication and misunderstandings could unwittingly push countries toward tension.
And a significant and sustained decline in the global supply of oil – whatever the cause – could simultaneously slow growth and increase inflation, a cursed combination known as stagflation.