Rising oil prices driven by the conflict in the Middle East could push the global economy into a severe downturn, according to Larry Fink, the chief executive of BlackRock.
Speaking to investors, Fink stated: “If Iran remains a threat and crude prices stay elevated, the consequences for the world economy would be profound.”
He warned that oil could spike to $150 per barrel if the crisis continues, potentially triggering a “stark and steep recession.”
Fink also mentioned that prices could drop below pre-conflict levels if tensions ease and Iran reintegrates into global markets, providing some relief for energy-dependent economies.
This warning comes as financial markets have been unsettled by the escalation in the Gulf, leading investors to reassess the outlook for energy costs.
Analysts at Morgan Stanley cautioned that the UK could face a sharp economic slowdown before 2027, especially if the Bank of England is forced to raise interest rates to counter persistent energy inflation.
Bruna Skarica, Morgan Stanley’s chief UK economist, warned: “A pronounced UK recession at the beginning of the year is likely if energy costs remain near recent highs and borrowing costs increase.”
Simon French, chief economist at Panmure Gordon, echoed these concerns, suggesting that a recession in the latter half of 2026 “is a real possibility.”
Thomas Pugh, chief economist at RSM UK, said: “Everything depends on how energy prices move going forward, but we now expect growth of around 0.5% this year with a decent chance of a recession.
The escalation in the Middle East has already increased pressure on UK manufacturers. Data from S&P Global for March showed the fastest rise in factory input prices since September 1992, reflecting higher fuel and energy costs.
Supply chain disruptions are also a concern, with approximately one in four manufacturers reporting longer delivery times and some businesses increasing stock levels in anticipation of further disruptions.
Private sector activity weakened last month, with the S&P Global composite index falling to 51, its lowest level in six months and only slightly above the contraction threshold.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “The acceleration in cost growth in the manufacturing sector was especially severe, being the sharpest since the depreciation of sterling following Black Wednesday.
He added: “Inflationary pressures have surged higher on the back of rising energy prices and fractured supply chains.”
Analysts warn that if oil and gas prices remain near current highs, the combination of higher manufacturing costs, energy bills, and borrowing rates could strain households and businesses, intensifying the risk of recession both in the UK and globally.
Williamson said: “The Middle East conflict has hit the UK economy in March, stalling growth while driving inflation sharply higher.
