As I look at the current economic and geopolitical events playing out today, red flags pop up everywhere on the global economic front, including major economies like China, the United States, and Japan heading into recessions.
The European Union is already in an accelerating downturn (i.e. recession), setting the stage for an uncommon worldwide recession, if not an all out depression.
Middle East Escalation and Oil Price Volatility
As we assess the current landscape, potential scenarios of heightened tensions in the Middle East could project oil prices to soar to $150 per barrel or beyond.
This surge in oil prices raises concerns about a severe recession in the United States and Western Europe, potentially surpassing the economic downturns experienced in 2008 and 1974.
Read: Bloomberg Economics estimates oil prices could soar to $150 a barrel and global growth drop to 1.7%.
Market Performance and Risks: Highlighted Sectors Amid Economic Turmoil
The Dow Jones Index collapsed 42% in 1974 due to economic recession and a middle-east oil/gas crisis.
The same scenario exists today, and one could logically argue that the 2024 recession and oil supply volatility are considerably larger and more acute than in 1974.
Considering the unfolding events, there is a suggestion of an approaching market decline of at least 30%, with the possibility of a 50% drop if geopolitical tensions, particularly in Ukraine or the Middle East, intensify further, or if a global financial crisis emerges.
Commodities Outlook: Divergence in 2024 Trends
Analyzing the current landscape, the commodities market is expected to witness a varied performance in 2024. Basic commodities such as copper, iron ore, coal, non-precious metals, and agricultural produce are likely to experience declines as the global recession unfolds.
In contrast, gold and silver are projected to perform well, driven by declining interest rates and a flight to quality. Energy prices are poised to be volatile, influenced by economic weakness and geopolitical fears.
Banking Crisis Alert: A Closer Look at Impending Financial Challenges
As we further consider current economic concerns, there is a prediction of a more acute Stage 2 of the banking crisis following this relatively quiet period since June.
Attention is focused on midsized, regional banks with $100–$750 billion in assets, raising fears of a new global financial crisis with potential far-reaching consequences.
View list of banks ranked by total assets here.
