The Iran war is driving an oil shock - but not a broad supply chain crisis, Goldman Sachs says

"Today's shock is more narrowly concentrated in the energy sector, whereas the energy price increases in 2022 were only one aspect of a much broader global supply chain crisis and inflation surge. Goldman estimates the surge in oil prices could reduce global GDP by about 0.3% and raise headline inflation by roughly 0.5 to 0.6 percentage points over the next year."

"Non-energy trade with Gulf economies accounts for only about 1% of global trade, limiting the risk that disruptions ripple through global supply chains. As a point of comparison, the post-pandemic shutdowns to China and East Asian trade affected over 20% of global trade, suggesting that supply chain disruptions from the war in Iran will be much more limited."

Oil prices have surged over 70% this year following US and Israeli strikes on Iran, with Brent crude trading around $105 per barrel and West Texas Intermediate near $99.50. Goldman Sachs economists distinguish this energy shock from the 2021-2022 crisis, noting it remains concentrated in the energy sector rather than causing broad supply chain disruptions. The bank estimates global GDP will decline by 0.3% and headline inflation will rise 0.5-0.6 percentage points over the next year, revising global growth forecasts to 2.6% from 2.9%. Limited non-energy trade with Gulf economies, representing only 1% of global trade, significantly reduces disruption risks compared to post-pandemic China shutdowns affecting over 20% of global trade.

Read at Business Insider