BlackRock CEO warns $150 oil could spark recession
black rock $BLK CEO Larry Fink said oil prices at $150 a barrel would lead to a “sharp, brutal recession,” warning that a prolonged campaign against Iran could keep energy prices at that level for years, according to The Hill. Fink made the remarks on the BBC’s “Big Boss Interview” podcast.
Fink said the resolution of the conflict would lie at one of two extremes. One path he outlined would see the return of Iranian oil to global markets once military operations end, driving down energy prices. The darkest scenario, Fink warned, would leave Tehran as a persistent regional destabilizer, keeping crude prices at or above $100 for an extended period – potentially close to $150 – with what he described as “profound implications” for the global economy.
Oil prices remained high this week, with WTI, the US benchmark, at around $91 per barrel and Brent, the international benchmark, at nearly $103. AAA data showed the national average for regular unleaded gasoline at $3.98, up more than $1 from the previous month.
black rock President Rob Kapito, meanwhile, warned that financial markets had not properly priced in the economic risks linked to the war, according to Bloomberg. Kapito warned that even a quick resolution to the conflict would not necessarily spare the economy: he estimates that the potential drag on growth could be as much as two percentage points, with inflation at a comparable risk of rising. Even a ceasefire would not quickly reduce energy prices, Kapito said, because supply networks would need time to recover before conditions returned to normal.
The S&P 500 held up relatively well, posting a loss of less than 5% during the conflict that lasted about a month, according to Bloomberg. Kapito said traditional defensive plays during times of conflict – bearish bets on stocks, gold and short-duration government bonds – have not reacted as investors might have anticipated. Among the conflict’s stranger market effects: government bonds have lost value — they typically rally in wartime — and gold has fallen nearly 15%, both moves reflecting investors’ fears that sustained energy costs are keeping inflation high.
Jim Zelter, chairman of Apollo Global Management, also addressed the Melbourne conference and issued comparable warnings about a US recession and the health of credit markets. Zelter pointed to weakening household confidence as a pre-existing vulnerability, noting that consumer confidence had already deteriorated in January and February before the oil price surge. “It’s not really a rate shock, it’s a confidence shock on spending in the world’s largest economy,” Zelter said.
On the supply side, the Trump administration has taken steps to ease pressure at the pump by lifting some sanctions on shipments of Iranian, Russian and Venezuelan oil already in transit, tapping the country’s strategic oil reserves and encouraging increased domestic crude production.
