A global recession could be triggered by the conflict in the Middle East as the humanitarian crisis compounds the challenges facing an already precarious world economy, two of Wall Street’s biggest names warned this weekend.
Larry Fink, chief executive of the world’s largest asset manager, BlackRock, said a combination of the Hamas atrocities of 7 October, Israel’s resultant attack on Gaza and Russia’s invasion of Ukraine last year had pushed the world “almost to a whole new future”.
In an interview with the Sunday Times, he said: “When the Russian invasion occurred in Ukraine, we said that the peace dividend is over. Geopolitical risk is a major component in shaping all our lives. We are having rising fear throughout the world, and less hope. Rising fear creates a withdrawal from consumption or spending more. So fear creates recessions in the long run, and if we continue to have rising fear, the probability of a European recession grows and the probability of a US recession grows.”
Jamie Dimon, the chair of America’s biggest bank, JP Morgan, told the same newspaper that the combination of Israel’s war on Hamas and Russia’s invasion of Ukraine – were “quite scary and unpredictable”.
“Here in the US we continue to have a strong economy. We still have a lot of fiscal and monetary stimulus in the system. But these geopolitical matters are very serious – arguably the most serious since 1938,” he said. “What’s happening on the geopolitical front right now is the most important thing for the future of the world – freedom, democracy, food, energy, immigration.”
The comments come three weeks after similar apocalyptic remarks from Dimon, who is one of the world’s best known financiers.
Three weeks ago, he issued a warning that the world may be living through “the most dangerous time the world has seen in decades”, with the escalating conflict potentially having “far-reaching impacts” on energy prices, food costs, international trade and diplomatic ties.
At the bank’s most recent update to Wall Street last month, Dimon said: “The war in Ukraine compounded by [the] attacks on Israel may have far-reaching impacts on energy and food markets, global trade and geopolitical relationships. This may be the most dangerous time the world has seen in decades”.
The negative Wall Street sentiments about the global economy have been echoed elsewhere. Last week, the Economist published a leader articleentitled: “The world economy is defying gravity. That cannot last.”