Here’s how Wall Street sees the Israel-Iran conflict affecting recession odds

• Israel’s conflict raises Iran concerns about a possible closure of the Strait of Hormuz.

• Goldman Sachs and other banks warn of the risk of recession if global oil supplies are disrupted.

• High oil prices affect global economic growth and inflation.

The risk of stagnation dramatically decreased from its peak in April after the Donald Trump ads, but the Israeli conflict ignited new concerns about the path of global economic growth.

After the American air strikes on Iranian nuclear facilities during the weekend, the markets are concerned about Iran preventing the Strait of Hormuz, one of the most important shipping points in the world. During the weekend, Iran on the Strait of Hormuz rose to more than 50 % on polymers.

The risk of military infection is a major cause, Goldman Sachs said it has not reduced the possibility of stagnation, which is 30 % hovering.

With nearly 20 % of the world oil through the strait, the closure would increase the oil bottle and send oil prices, and then inflation, higher.

At the current levels of about $ 73, a barrel of American oil and $ 76 a barrel for Brent have increased, and crude oil prices have been about $ 10 a barrel since early June, which will not be sufficient for a great threat to inflation and GDP growth, as Jean Hatzius, the bank’s chief economist in the bank, wrote in a note at the end of the week.

However, he sees the possibility of a much larger step in prices “in the tail scenario where the conflict expands significantly and/or the hormone strait is closed.

In the worst scenario, oil sizes may decrease across the Strait of Hermoz by 50 % for one month, and then remain a 10 % decrease for another 11 months, as Goldman Sachs are predicted.

This would lead to the peak of Brent oil prices to the peak at $ 110 a barrel before it reaches $ 95 a barrel in the fourth quarter of 2025.

While the Goldman Sachs base case assumes that Brent oil prices drop to $ 60 by the end of the year and provide a modest batch of GDP growth, energy supply disorder can reduce global growth by 0.3 percentage points and send high inflation by 0.7 percentage points.

Regarding the markets, Morgan Stanley also sees the rise in oil prices as a potential negative incentive that raises a 19 % possible decrease in S&P 500. According to Mike Wilson, the bank’s chief investment employee and stock head is 75 % on an annual basis in oil prices historically enough to influence the work and leadership.