In a recent report released by the Institute of International Finance (IIF), analysts have warned of a potential surge in oil and natural gas prices should conflicts in the Middle East escalate.

The report, published on Thursday, outlines the significant repercussions that could unfold if current tensions in the region take a turn for the worse.

According to the IIF’s assessment, while the likelihood of a wider regional war remains below 30% in their baseline scenario, the consequences of such an escalation would be dire for global energy markets.

Chief Economist Garbis Iradian, leading the team of analysts, emphasized the dependency of oil and natural gas prices on the severity and duration of any supply disruptions.

In the event of a significant escalation, the report suggests a staggering surge of 40% in oil and natural gas prices for the year 2024.

Such a spike would not only impact energy markets but also trigger considerable increases in freight and insurance costs, thereby exacerbating inflationary pressures at a time when many economies are already grappling with above-target inflation rates.

The report’s more pessimistic outlook paints a troubling picture of potential scenarios wherein efforts by the United States and its allies to quell the activities of the Houthis, a Yemeni rebel group, could falter.

The Houthis, whose attacks on Red Sea shipping lanes have been ongoing since late 2023, are protesting Israeli military operations in the Gaza Strip.

These attacks have already prompted Western security initiatives to bolster operations in the region.

Should the Houthis persist and expand their attacks to include oil tankers and carriers transporting essential commodities like iron and grain, the repercussions on global trade and energy supply chains would be significant.

Garbis Iradian underscored the potential ramifications of such developments, stressing the need for proactive measures to mitigate the risks posed by escalating conflicts in the Middle East.

The IIF’s report serves as a sobering reminder of the interconnectedness of global energy markets and geopolitical tensions.

While the baseline scenario offers a glimmer of hope that current turmoil may not escalate into a wider conflict, the potential for unforeseen events underscores the importance of proactive diplomacy and risk management strategies on the part of policymakers and market participants alike.

As the world closely monitors developments in the Middle East, stakeholders across sectors are urged to remain vigilant and prepared for any potential disruptions that could impact energy prices and global economic stability.

The Institute of International Finance’s report serves as a stark reminder of the fragility of global energy markets in the face of geopolitical uncertainty, urging stakeholders to remain vigilant in the face of escalating tensions in the Middle East.

This article was created using automation technology and was thoroughly edited and fact-checked by one of our editorial staff members