Geopolitical risks may be the biggest threat to global markets, The Bank of England (BoE) warned On Wednesday.
“Global vulnerabilities remain significant, as does uncertainty around the geopolitical environment,” the Bank of England said. “Markets remain susceptible to a sharp correction.”
The Bank of England published its Financial Policy Committee report a day after the Iran release. at least 180 ballistic missiles towards Israel. The missile barrage has raised fears of a broader war in the Middle East.
A map showing sirens sounded across Israel when the bombing began. Fountain: msn.com
Concerns over escalating violence in the Middle East increased after Israel killed Hezbollah leader Hassan Nasrallah in airstrikes on September 27.
JPMorgan JPM CEO Jamie Dimon warned on September 24 that “there are a lot of wars being fought right now.”
“My caution is all geopolitics,” he said.In an interview with CNBC TV18 at a JPM conference in Mumbai.
Global markets react to geopolitical risks
European markets and global oil prices reacted quickly to the ballistic missile attack.
The Eurozone Stoxx 600 continued to retreat from its all-time high and is trading flat today. Germany's DAX40 retreated from its record level, falling 0.55% today and continuing its 1.8% decline to reach a high of 19,473.
Brent crude oil rose 3.19% after Tuesday's attack, reversing most of its September decline.
The World Bank said in April that a serious oil supply disruption could push Brent higher Oil prices above $100 per barrel..
“Geopolitically driven oil price increases continue this morning,” wrote Mohamed El-Erian, president of Queens' College, Cambridge, in unknown.
“Because there has been no real disruption,” oil prices have not soared, wrote El-Erian, who is also a Bloomberg opinion columnist.
A new conflagration could drive up prices for natural gas, fertilizer and food, the World Bank said at the time.
“No oil and gas facilities have been damaged and logistics remain operational.” Paul Sullivansaid a professor at John Hopkins University.
“Risk premiums for oil and oil transportation could increase significantly if there is a targeted attack” on infrastructure, he added.
Geopolitical developments worry ECB officials
But European Central Bank (ECB) officials are concerned about rising geopolitical uncertainty. An increase in energy prices could reverse the slowdown in inflation seen in much of Europe.
euro zone Annual inflation slowed to 1.8% in September. Up from 2.2% in August, the EU statistical office said on Tuesday.
“We face enormous uncertainty, especially taking into account the numerous economic, financial and geopolitical risks that prevail,” said Luis de Guindos, vice president of the ECB, on the same day.
The ECB official spoke at the fifth joint conference of the ECB, the Bank of Canada and the Federal Reserve Bank of New York.
De Guindos said in Riga. today that the economic recovery of the euro area is likely to gain momentum.
He expressed optimism that faster growth could be achieved after a disappointing second quarter. However, he warned that risks in the bloc are still “tilted to the downside.”
Main risk of geopolitical uncertainty
A Bank of England survey conducted in late July and early August echoed prevailing concerns about geopolitical uncertainty.
He The Bank of England found that 93% of the 55 banks Those who responded placed geopolitical risk as the biggest concern. That was the highest level recorded in the survey dating back to 2008.
Elevated geopolitical uncertainty could put “further pressure on sovereign debt levels and borrowing costs,” the Bank of England said today.
The U.K. central bank flagged “structural trends, such as demographics and climate change,” as factors that could undermine markets.
Sharp market corrections “could affect the cost and availability of credit for UK households and businesses”, it said.
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