Good morning, Peter Vanham, here in Geneva.
The war between Israel and Hamas has deeply divided societies around the world, including many companies and institutions. But as the Israeli offensive in Gaza intensifies, companies will have to shift from talking about the conflict and its impact on employees to addressing its economic ramifications.
These could be so severe that they could plunge the world back into a recession, cause oil prices to rise to $150, and depress stock prices by about 20%. Hey-The chief economist of the Parthenon, Gregory Daco, told me. Even companies that do not do business in the Middle East would be caught up in its economic consequences.
"If your market is 90% based in the US, in the Midwest, why should you care about [conflict]? Well, you will have to worry because it will have consequences that will affect your business,โ Daco said. "Depending on how diffuse the situation becomes, the consequences could range from very marginal to significant."
The hypothetical situation described above, which Daco called the โuncontainedโ scenario, includes an extension of the front into Lebanon and Syria, direct involvement of the United States and Iran, and broader social unrest in the Middle East. That outcome is no more likely than a more contained scenario, which would limit the war to a ground offensive in Gaza and have almost no long-term global economic consequences. Still, CEOs had better take all possibilities taken into account as they plan for the future.
The prospect of long-term economic consequences also points to a definitive end to the days when multinational companies could simply forecast economic growth, trade and manufacturing costs for their global markets. They must also take into account the constant threat of disruptive forces such as political and social unrest and war.
Reshoring and nearshoring may provide relief from potential trade disruptions resulting from the Middle East conflict in the Strait of Hormuz or the Suez Canal, but no one can escape rising oil prices, inflation, a recession or a drop in the price of oil. the stock market. โResilienceโ and โgeostrategyโ are my nominees for 2023 buzzwords.
More news below.
Peter Vanham
peter.vanham@fortune.com
@petervanham
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