This is how crises begin
If the US and Israel have a smart plan, it is time to show it now.
Soon it will not only be the Middle East's cisterns that are on fire, but the entire world economy. The government's economic forecast for 2026 is not only at risk of being outdated.
It may turn out to be the least of our problems.
1956, 1973, 1979, 1990. These are years that are engraved in world history. Then conflicts erupted in the Middle East that triggered a price shock for oil and triggered economic crises that spread across the world.
Now we can add 2026.
According to experts, however, there is an important difference.
This time, the impact on the oil market is much greater. When the Suez Canal was closed in 1956, ten percent of global oil flow was affected. The ongoing war has cut off 20 percent of oil supplies.
Where will this end? It is too early to say. But this past weekend shows that much of what was feared could go wrong in the conflict has already happened:
That's not far off. When trading opened on Monday morning, the price rose 25 percent to almost $120 a barrel, the highest level since Putin's invasion of Ukraine.
The price fell back slightly after news that the G7 countries will discuss the use of the so-called strategic oil reserve, a clear sign of crisis.
On Monday morning, oil was trading at $108 a barrel, which is more than 50 percent higher than before the outbreak of war.
Gas prices in Europe also rose by 20 percent on Monday and have now more than doubled since the war began. This is a hard blow to the gas-dependent European industry and will also mean higher electricity prices in Sweden.
It is not just the energy market that is being affected. There are more and more signs of effects that hit at several levels.
Such as the price of fertilizer is skyrocketing, which is affecting food prices. Or that the price of aluminum has risen sharply because smelters in the Middle East have been forced to close. Or that deliveries of important input goods for the production of
In Asia, which is most dependent on oil and gas imports from the Middle East, there are reports of queues, rationing and problems for the textile industry due to rising energy prices. It is also putting pressure on already strained government finances in the region.
South Korea has introduced a price cap on fuel for the first time in 30 years.
Rising oil prices are a “small price to pay for security and peace,”
Some of those fools may well be among his own citizens.
Gas prices have already risen in the United States, and
This is bad news for Republicans ahead of the fall midterm elections and increases pressure on Donald Trump to end the war. It is clear that Iran is trying to cause as much short-term economic chaos as possible precisely to increase this pressure.
“Think the unthinkable and plan for it,” urged the head of the International Monetary Fund, IMF, Kristalina Georgieva, in a speech on Monday.
Kristalina Georgieva, IMF managing director. Photo: Markus Schreiber /AP/TT
Sweden then?
The Stockholm Stock Exchange fell by almost 3 percent on Monday morning and has now fallen by 8 percent since the war began.
Last week, the National Institute of Economic Research announced that a ten percent higher crude oil price means 0.1 percent higher inflation in Sweden. If today's levels hold, this would be an increase of 0.5 percentage points. This is a real blow to the Riksbank and an interest rate cut is unlikely to be in the cards. Short-term market interest rates have started to rise in the past week and the
On Thursday, Finance Minister
But if the price were to rise to 120 dollars per barrel and remain there for a longer period of time, it will be significantly worse, the government warned.
Oil was already sniffing at those levels on Monday.
But it could be significantly worse. It could go as far as rationing oil,
The biggest effect, as usual, is about psychology. In just one week, the forecast for the war and its consequences has deteriorated dramatically.
Who knows what it will look like in another week? Before the situation clears up, which could take weeks if not months, there is a great risk that an economic lull will once again descend upon Sweden.
The government predicts that Swedish GDP will rise by 3 percent in 2026 after three lousy years in a row and that food prices will fall thanks to the halved VAT.
The question is whether that forecast is already ripe for the archive.
The question that quickly arises is the following: what does Plan B look like?
