“All of these things are happening at the same time,” Mr. Gill said. “We are in one of the most fragile times for the global economy.”
Mr. Gill’s assessment mirrors that of other analysts. Jamie Dimon, chief executive of JPMorgan Chase, 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 biggest and most important thing for the Western world.”
Recent economic woes have been exacerbated by worsening geopolitical conflicts across continents. Tensions between the United States and China over technology transfers and security only complicate efforts to cooperate on other issues such as climate change, debt relief or violent regional conflicts.
The prevailing political concerns also mean that traditional monetary and fiscal policy tools, such as adjusting interest rates or government spending, may be less effective.
The brutal fighting between Israel and Hamas has already cost the lives of thousands of civilians and caused deep suffering on both sides. But if the conflict remains contained, the impact on the global economy is likely to be limited, most analysts agree.
Federal Reserve Chairman Jerome H. Powell said Wednesday that “at this point it is not clear whether the conflict in the Middle East is on track to have a significant economic impact on the United States,” but added : “That’s not the case.” That doesn’t mean it’s not incredibly important.”
Middle Eastern oil producers no longer dominate the market as they did in the 1970s, when Arab nations sharply cut production and imposed an embargo on the United States and some other countries after a coalition led by Egypt and Syria attacked Israel .
Currently, the United States is the world’s largest oil producer, and alternative and renewable energy sources make up a slightly larger portion of the world’s energy mix.
“It’s a highly volatile, uncertain and frightening situation,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University. But there is “the understanding among most parties, the United States, Europe, Iran and other Gulf states,” he continued, referring to the Persian Gulf, “that it is in no one’s interest for this conflict to grow significantly expands beyond Israel and Gaza.”
However, Mr Bordoff added that missteps, poor communication and misunderstandings could, however, push countries to escalate even if they did not want to.
And a significant and sustained decline in global oil supply — for whatever reason — could simultaneously slow growth and fuel inflation, a cursed combination known as stagflation.