By Chrysostomos Tsoufis

Risk of Iran-Israel war more than doubles to 22% (from 10% in April), BMI sees Fitch in its final analysis.

In this scenario, one of three analyzed by Fitch, Israel launches a strategic strike on Iran (energy or nuclear facilities), whose response to Israeli natural gas facilities leads to an all-out war between the two sides. In this scenario world GDP is subtracted 2-3% for this year and 0.5% for 2025. The price of oil almost doubles to $150/barrel as Iran will try to close the Strait of Hormuz through which the 20.5 % of global oil flow. THE inflation in the short term it will rise again and some central banks like the FED could react by raising interest rates again

In the medium scenario that gathers 28% probability, the strike by Israel is not so strong and the escalation soon de-escalates since Iran also does not have many options for ..retaliation. This scenario is the mildest as it has very little impact on both global GDP as well as oil prices that will range between $70-75/barrel. Undaunted, central banks continue their strategy of lowering interest rates

Fitch’s baseline scenario – at 50% – sees Iran and Israel trading blows for weeks but eventually diplomatic pressure pays off. Here, too, the impact on global growth is small, while the price of oil “hits” even $90 before starting to decline again. Interest rate cuts by central banks are unchanged, but may slow.

In the inevitable event that an all-out war between Iran and Israel actually breaks out, the environment of high energy prices and inflation at the same time as high interest rates and the atmosphere of uncertainty, is driving the Eurozone economy back into recession.

According to Fitch, the Greek economy is particularly exposed to the possibility of war.
Among the developed economies examined, Greece has the largest oil import as a percentage of GDP at 7%. Fuel and energy participate in the inflation basket at 8.2% (7th highest value) while oil and natural gas account for 73% of total energy consumption in the country (10th highest value)
Result ? The Greek economy should be considered as the 6th most exposed among developed countries:

Portugal 50.5 points
Austria 39.2 points
Belgium 36.1 points
S. Korea 35.5 points
Italy 35.3 points
Greece 34.6 units

As expected, the USA is the least exposed, followed by Germany and Canada

Also as expected, the blow to developing economies would be even greater. In the “burnt out” zone are countries such as Pakistan (energy participates in the inflation basket with 20%), Kenya, Ethiopia, India and Brazil (despite exporting oil)