JPMorgan estimates economic damage in US$150 crude scenario

(Bloomberg) — The price of oil hasn’t even hit $100 a barrel, but that hasn’t stopped economists at JPMorgan Chase & Co. from taking worst-case scenarios about what a rise to $150 a barrel this quarter.

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In a report released Friday, economists including Joseph Lupton and Bruce Kasman warned that such a shock would be enough to cut global growth by more than three-quarters, to around 0.9% in the first half of the year, from the 4.1% than currently forecast.

In the bank’s scenario, global inflation would also more than double, to 7.2% instead of the projected 3%. That could force central banks to tighten monetary policy even faster than they currently intend to do so, analysts said.

«Oil shocks have a long history of causing cyclical downturns,» they wrote. «The latest geopolitical tensions between Russia and Ukraine increase the risk of an increase this quarter.»

JPMorgan noted that the analysis does not consider the financial market consequences of a confrontation between Russia and Ukraine or the effects of US sanctions on Russia.

After rising this week to its highest level since 2014, oil pulled back on Friday with Brent crude trading at $87.62.

original note:

JPMorgan War-Games Economic Damage of a $150 Oil-Surge Scenario

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