JPMorgan CEO Jamie Dimon was sounding a warning in the bank’s third quarter earnings report released on Friday, noting that the ongoing conflict between Russia and Ukraine, mixed with the rapidly escalating Israeli-Palestinian conflict, could produce far-reaching consequences for the global economy, as well as geopolitical ramifications across the world.
Dimon went on to say that although the US economy is presently healthy, the nation does face a raft of challenges, such as a tight labor market, the threat of inflation spiking further, high government debt levels, and the longer term risks of keeping interest rates high for an extended period. However he warned, as the geopolitical conditions deteriorate, the risks to the global economy are increasing exponentially.
He said, “The war in Ukraine compounded by last week’s attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships. This may be the most dangerous time the world has seen in decades.”
In Friday, in an interview with CNN, Dimon said that bank executives in America are, “climbing the wall of worry,” a famous Wall Street truism describing what it takes to continue to remain bullish in the face of geopolitical crises and economic uncertainty.
The CEO went on, “We do a hundred stress tests a week… Usually, geopolitics presents itself as a deep recession or a mild recession… And markets doing well is not a reason ever to say they will continue to do well.”
Over at the world’s largest hedge fund, Bridgewater Associates, founder Ray Dalio warned that the Israeli-Palestinian conflict could spread to other countries, in ways which could end up affecting the entire globe.
In a LinkedIn post on Thursday, Dalio wrote, “In my opinion, this war has a high risk of leading to several other conflicts of different types in a number of places, and it is likely to have harmful effects that will extend beyond those in Israel and Gaza,” adding, “the Israel-Hamas war is another classic, unfortunate step toward a more violent and encompassing international war.”
Already global oil prices have surged in response to the growing conflict between Hamas, which controls most of the Gaza strip, and the Israeli Defense Forces. Analysts say if the conflict spreads to nearby nations, such as Iran, it could destabilize the Middle East, which is responsible for over one third of the global supply of seaborne crude oil. That could exacerbate the existing supply deficit, causing global crude prices to skyrocket.
