Goldman Sachs Global Economics Comment: Global Economic Impacts of the War in Iran
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Goldman Sachs assesses the macroeconomic fallout of the Iran conflict on global growth, inflation, and policy rates. Oil prices have surged to approximately $80 per barrel, marking a 14% increase since late February, which is expected to modestly lift inflation and dampen growth. Under the baseline scenario, global inflation would rise by 0.2 percentage points, core inflation by less than 0.1 percentage points, and global GDP growth would decelerate by 0.1 percentage points.
In a more severe scenario where oil prices temporarily spike to $100 per barrel, global inflation could jump by 0.7 percentage points and growth could slow by 0.4 percentage points. Furthermore, financial conditions have tightened by 31 basis points, potentially dragging global GDP growth down an additional 0.3 percentage points over the coming year.
LNG supply disruptions present supplementary inflationary risks. A production halt in Qatar would impact 19% of global supply. Historically, central banks have shown limited reaction to oil price shocks. However, should inflation remain elevated or the shock prove substantial, policymakers might modestly tighten monetary policy. Taylor rule simulations suggest that while baseline scenarios leave policy rates largely unaffected, emerging markets face hawkish risks, primarily manifesting as delayed rate cuts rather than immediate rate hikes.