The situation in the Middle East between Iran and Israel could put the stock markets on a “bumpy road” – especially if it continues to escalate, warns renowned capital market expert Mohamed El-Erian.
Mr. El-Erian, Ukraine, Middle East, Taiwan: What significance does geopolitics now have for the capital markets?
Increased geopolitical risk poses a threat to both the global economy and markets. For example, if tensions between Iran and Israel escalate, this would drive up oil prices and create stagflationary headwinds for the global economy . This would undermine the already relatively weak growth prospects for the global economy, with the notable exception of the US and some other countries. It would also complicate the inflation picture at a time when the world’s influential central banks, led by the European Central Bank, are moving closer to cutting their key interest rates.
The consequences of an escalation in the Middle East for monetary policy
What could this mean for stocks?
The resulting impact of such a scenario on companies’ prospects – particularly potentially lower profits and higher financing costs – would put stock markets on a bumpier ride.
Source: Stern
