FAST FIVE: JPMorgan Models War Between Russia And Ukraine: Sees Oil Soaring To $150, Global Growth Crashing

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most recently of course the surge in oil to all time highs in 2008, which some say sealed the fate of the global financial crisis.

So looking at the latest geopolitical tensions between Russia and Ukraine, JPM warns that “these raise the risk of a material spike this quarter.” That this comes on the back of already elevated inflation and a global economy that is being buffeted by yet another wave of the COVID-19 pandemic, JPMorgan sees the risk of a kinetic war breaking out as adding “to the near-term fragility of what is otherwise a fundamentally strong recovery.” Drilling down, JPM considers a scenario in which an adverse geopolitical event between Russia and Ukraine materially disrupts the oil supply.

This scenario envisions a sharp 2.3 million b/d contraction in oil output that boosts the oil price quickly to $150/bbl-a 100% rise from the average price in 4Q21.

Against the backdrop of a year of already elevated inflation and extremely accommodative policies, JPM warns that central banks may display less patience than normal-particularly in the EM, where rising global risk aversion may also place downward pressure on currency values.

To be sure, as with any Wall Street analysis that models war, JPM is quick to caveat its findings, noting that “it is important to recognize that the scenario of a jump in the oil price to $150/bbl is premised on a sharp and substantial shock to the oil supply.

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