PARIS: Global energy prices have shot upwards after the US and Israel unleashed war in the Middle East, but just how far those shocks will ripple across the economy remains unclear.
Still, the spectre of "stagflation" -- high inflation coupled with stagnant economic growth -- once again looms over the global economy in the event of a prolonged conflict.
The risks are still highly uncertain at this stage, as they largely depend on how long conflict lasts.
"It is still too soon to determine whether the current crisis will translate into sustained global inflation," said economist Paola Subacchi of the University of Bologna and Sciences Po in Paris.
"Much depends on how far and how long oil and gas prices rise, and whether those increases feed through broadly into production and transport costs," she added.
Bank of America economists wrote that their baseline scenario was a shorter conflict, which would limit how much further oil prices might rise and see "the shock fading in the next few weeks".
Paul Chollet, chief economist at the French banking group Credit Mutuel Arkea, said a short conflict -- such as a four- or five-week war, as US President Donald Trump has suggested -- would mean that "prices, particularly energy prices, will return to their pre-bombing levels within two months".
"That doesn't mean that you won't see inflation in the short term," he added, noting that price increases are already evident for fuels such as petrol. - AFP
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