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<h3>EVEN IF WAR ESCALATES, THIS ISN’T THE 1970’S</h3>
The surge in energy prices and its possible drag on growth since the start of the Middle East war have drawn tempting parallels with the stagflation - stagnant growth and high inflation - that plagued the global economy after the OPEC oil shock in the 1970s.
Investors have rushed to price in a series of rate rises from central banks around the world, marking a swift change from the pre-war view that most large central banks would either cut rates modestly or leave them on hold this year.
However, today’s economy is a lot more resilient to energy price shocks, and the United States even more so, given its status as a net energy exporter thanks to the shale boom that started in the previous decade.
Bank of America has quantified it, by showing that to produce the same amount of GDP, it takes only a third of the oil that it took in the 1970s.
In the 1970s, a 10% oil price shock had an inflationary impact of 90 basis points, whereas now, that impact is around 25 bps, the bank said.
“Furthermore, we find the cost in terms of lower growth to have diminished from over 70 bps in the earlier period to about 5 bps today,” it said.
“In our view, a repeat of the 1970s appears as an unlikely scenario, even if the war escalates,” the bank said.
(Amanda Cooper)
<h3>EARLIER LIVE MARKETS POSTS: TIME TO PAY ATTENTION TO UZBEKISTAN’S SUM? CLICK HERE EUROPEAN STOCKS NOT TOO FAZED BY IRAN TALKS FAILURE CLICK HERE BEFORE THE BELL: EUROPEAN SHARES SET FOR OPENING FALL CLICK HERE MORNING BID EUROPE: OIL SURGES ON US BLOCKADE OF IRAN CLICK HERE</h3>
Oil and GDP Oil and GDP
<img src="https://imageproxy.pbkrs.com/https://www.reuters.com/graphics/OIL-ECONOMY/OIL-ECONOMY/lgpdgxyqgvo/Pasted%20image%201776076065750.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" width="548" height="374" original-src="https://imageproxy.pbkrs.com/https://www.reuters.com/graphics/OIL-ECONOMY/OIL-ECONOMY/lgpdgxyqgvo/Pasted%20image%201776076065750.png"/>

LIVE MARKETS-Even if war escalates, this isn't the 1970's