No risk is more serious than that posed by a further spike in oil prices.
The reason is fear. Not only are oil supplies plentiful, but demand in the US and Europe has been lower, owing to decreasing car use in the last few years and weak or negative GDP growth in the US and the eurozone. Simply put, increasing worry about a military conflict between Israel and Iran has created a “fear premium.”
If the drums of war (between Iran and the U.S.-Israel alliance) grow louder this summer, oil prices could rise in a way that will most likely cause a US and global growth slowdown, and even an outright recession if a military conflict erupts and sends oil prices soaring.
Oil is already well above $100/barrel, despite weak economic growth in advanced countries and many emerging markets. The fear premium might push prices significantly higher, even if no military conflict ultimately takes place, and could trigger a global recession if one does. - in Business Insider
Related, United States Oil fund ETF (USO), Exxon Mobil (XOM), Crude Oil Futures, Transocean (RIG), ConocoPhillips (COP)
Nouriel Roubini is an American economist. He teaches at New York University's Stern School of Business and is the chairman of Roubini Global Economics.
