Reference News Network June 24 report: The website of the Nikkei Shimbun published an article titled "Oil Prices Doubling May Cause a Sharp Increase in the Probability of US Economic Recession" on June 23. The author is Zhang Jianzheng, and the content is translated as follows:

US President Trump announced an attack on Iran's nuclear facilities on the 21st. It seems that the US has finally directly involved itself in this war to support Israel, which aims to force Iran to give up its nuclear program. If the conflict between the US-Israel alliance and Iran escalates, causing further increases in crude oil futures prices, the probability of a US economic recession will sharply rise.

After the US military attacked Iran, Trump said in a televised address to the American people: "Now is the time to create peace. If not, future attacks will be even more intense." He urged Iran to return to negotiations with the US and abandon its nuclear program. As for the possibility of Iran launching retaliatory attacks, NBC News cited a senior White House official who reported that "the next 48 hours are particularly worrying."

The most noteworthy aspect of the US-Iran conflict is the trend in crude oil futures prices. Before the attack on the 20th, the WTI July contract closed at $74.93 per barrel, an increase of about 10% compared to before Israel attacked Iran.

In the summer of 2022, when the Federal Reserve began aggressive interest rate hikes, the WTI price once reached the $120 per barrel range. Subsequently, as inflation slowed down, the WTI price entered a long-term downward trend and fell to a low of $50 per barrel in April of this year. However, since May, with the intensification of geopolitical risks in the Middle East, the WTI price re-entered an upward trend and rose to the $77 per barrel range on June 12.

The US-Iran conflict may accelerate the rise in WTI prices. Looking back, if the crude oil futures prices doubled in the past year, the US economy would likely fall into a recession. This is because factors such as rising gasoline prices will drag down consumption.

The WTI price had doubled within the year in 1990, 2000, and 2008, and each time it resulted in an economic recession. The most recent example was 2020, when the WTI price doubled due to the pandemic, and it experienced extreme fluctuations for the first time in history, with prices falling into negative territory due to a sharp drop in transportation volume and demand. The National Bureau of Economic Research, which predicts economic cycles in the US, also admitted that the US economy was in a recession at the time, although it lasted only a short period.

As the situation develops, even if people increasingly worry that the empirical rule "WTI price doubling within the year indicates a US economic recession" proves correct again, there is nothing surprising about it. Currently, the WTI price has risen by 30% from its recent low point in mid-April. When the price rises to $115, it means it has doubled from the level in April.

The 12-month economic recession probability calculated by the New York Federal Reserve based on the difference between long-term and short-term interest rates was only 28% in April, a significant decrease from 70% in April 2024. Goldman Sachs' calculation of the probability of the US entering a recession within the next year remained at 30%. However, the view represented by Goldman Sachs' chief economist Jan Hatzius also pointed out, "If the conflict expands or the tail risk of Iran closing the Strait of Hormuz appears, the probability of a US economic recession will sharply rise."

Data from the US Commodity Futures Trading Commission showed that as of June 10, the net selling position of non-commercial sectors (speculative capital) such as hedge funds on S&P 500 index futures increased significantly compared to the previous week (69,628 contracts) to 127,969 contracts, reaching the highest level in nine months. Speculative capital may be building positions to cope with economic deterioration caused by a sharp rise in WTI prices and a decline in stock prices. (Translated by Liu Lin)

Original: https://www.toutiao.com/article/7519430502550438427/

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