Sunday, June 15, 2014
Watch what the Iraq conflict does to the economy
The US and world economies are already in a parlous state. Now the outbreak of internecine warfare in Iraq threatens to drive them down even further. Just look at what's already happened to the price of oil:
If (as appears likely) Iran gets involved on the side of the Shi'ites in Iraq to fight the (largely Sunni) Al Qaeda offshoot ISIS, expect the oil price to deteriorate further. Other Arab states are likely to back ISIS (e.g. Saudi Arabia, Qatar, etc.), which will destabilize the oil market even further. It's not inconceivable that an attempt may be made to close the Strait of Hormuz by a terrorist attack. If that happens, expect oil prices to double or triple almost overnight.
It only needs one severe shock to bring down our economic house of cards. The oil price might be sufficient to provide it, unless the situation in Iraq cools down very quickly.