In a report this week, Bloomberg finds that if Iran were to become involved in the Israeli-Palestinian conflict, it would cause oil prices to skyrocket, driving the economy into a recession.

In the report, by Bloomberg Economics, analysts examined the potential impact of three different scenarios on global growth and inflation – if the conflict were to remain confined within Israel and the Palestinian territories, if the conflict were to spread, drawing in Lebanon and Syria, and if the conflict were to produce an open state of war between Israel and Iran.

Although all three scenarios would cause oil prices to increase, inflation to rise, and global economic growth to slow, the most damage by far was projected to come were Israel and Iran to enter a state of full-blown warfare,, according to Bloomberg’s analysts.

The report said, “The wider the conflict spreads, the more its impact becomes global rather than regional… Conflict in the Middle East can send tremors through the world because the region is a crucial supplier of energy and a key shipping passageway.” 

If that were to occur, the report predicts that oil would increase to $150 per barrel. Global inflation, which is presently forecast by the IMF to be 5.8% in 2024, would surge to 6.7%. Global economic growth, which is presently forecast to be 2.7%, would fall to 1.7%. That would cost the global economy roughly $1 trillion, and be the worst figure seen since 1982.

The report went on to warn that, “The spare production capacity in Saudi Arabia and the UAE may not save the day if Iran decides to close the Strait of Hormuz, through which one-fifth of the world’s daily oil supplies pass. There’d also be a more extreme risk-off shift in financial markets.”

The analysts warn that the effects of such a scenario would set in quickly, because the global economy is already reeling from the economic effects from the sanctions levied on Russia, which forced Moscow to reorient its global trade, especially its vital energy exports, such as oil and gas. If war should break out in yet another energy-producing region, it could cause the global economy to fall into a recession.

On the bright side, the report notes that war breaking out between Israel and Iran is still, “a low probability scenario.”

Already the onset of hostilities between Israel and Hamas has caused a surge in global oil prices, as international benchmark Brent crude futures for December delivery closed Friday at $90.80 per barrel, compared to roughly $84 per barrel one week prior.