Wall Street experts alarmed by dangerous prospects
War in the Middle East could trigger a global recession, Wall Street experts say. Their fears increase the risks associated with the Russian-Ukrainian conflict and the growing “probability of a recession in Europe and the United States”.
The conflict in the Middle East could lead to a global recession as the humanitarian crisis compounds the challenges facing an already fragile world economy, two of Wall Street's biggest investors warned.
According to The Guardian, the pessimistic comments come as the City of London braces for more gloomy news on the UK economy, with the Office for National Statistics due to provide an update on how things fared in the third quarter on Friday.
After growing marginally throughout 2023, the UK economy is expected to return to near-stagnation, according to city economists. There's also some disappointing new housing market data, with UK mortgage lending forecast to post its weakest growth in a decade during 2023 and 2024.
On the global economy, Larry Fink, chief executive of the world's largest Asset manager BlackRock, said the combination of the Hamas atrocities on October 7, the subsequent Israeli attack on Gaza and the outbreak of conflict in Ukraine last year had pushed the world “almost into a completely new future.”
In an interview with The Sunday Times, Fink said: “Geopolitical risk is a fundamental component that shapes all of our lives. We are experiencing growing fear around the world and less and less hope. Growing fear leads to a refusal to consume or an increase in spending. So fear breeds recessions in the long run, and if we continue to experience increasing fear, the likelihood of a European recession increases, the likelihood of a US recession increases”.
Jamie Dimon, chairman of the largest US bank JP Morgan, also told the same newspaper that the combination of Israel's war with Hamas and the conflict between Russia and Ukraine was “quite frightening and unpredictable.”
“What's happening on the geopolitical front right now, is the most important for the future of the world – freedom, democracy, food, energy, immigration,” he said.
The comments come three weeks after similar apocalyptic remarks from Dimon, who is one of the most famous financiers in the world. Last month, he warned that this is “the most dangerous time the world has seen in decades,” with the escalation of the conflict potentially having “far-reaching consequences.” for energy prices, food costs, international trade and diplomatic relations.
Wall Street's negative sentiment about the global economy is echoing elsewhere. Last week, The Economist published an editorial entitled: “The global economy is defying gravity. This cannot go on forever.”
One reason the conflict between Israel and Hamas is seen as a global economic threat is the world's dependence on the region's oil, which accounts for a third of the market. Economists often worry that sharp increases in oil prices could trigger a global recession.
Weak economic performance means that the threat of recession is already looming over the UK. Last week the Bank of England said in its monetary policy report: “UK GDP is expected to remain unchanged in the third quarter of 2023, lower than forecast in the [Bank’s] August report.” Some business surveys point to a slight contraction in output in the fourth quarter, but others are less pessimistic. GDP is expected to grow 0.1% in the fourth quarter, also weaker than previously forecast.
Meanwhile, mortgage growth in the UK is expected to be at record lows in 2023 and 2024. decade, EY ITEM Club predicts. The economic forecaster expects mortgage loans in 2023 to grow 1.5% net in 2023 and 2% net in 2024, representing the lowest two-year growth in a decade. He blamed the weak market on high mortgage rates, slow economic growth and weakening housing market sentiment.
Anna Anthony, managing partner for financial services in the UK, said the UK was “still in ways to avoid a recession this year,” but the economic situation remains challenging. “Significant cost of living pressures continue to impact households' ability to spend money, and more are finding it difficult to keep up with loan payments.