The ongoing conflict in the Middle East has put central banks in a predicament as they face new risks that are difficult to quantify [34823339]. Central banks, including the European Central Bank, US Federal Reserve, Bank of England, and Bank of Japan, are closely monitoring the situation for its economic implications [34823339]. The conflict between Israel and Hamas has the potential to lead to a significant increase in energy costs, which would have a direct impact on the global economy [34823339]. While the immediate impact may be minor compared to the human tragedies in the conflict zone, it would be bad news for an already weakened global economy [34823339]. The European Central Bank and the US Federal Reserve believe they can manage inflation without causing a recession by maintaining current interest rates for an extended period [34823339]. However, if the conflict escalates and oil prices reach $150 per barrel or higher, it could have more significant consequences [34823339]. Europe, in particular, is vulnerable due to its lack of substantial domestic oil production [34823339]. The uncertainty surrounding the conflict also affects consumer and investor morale, as well as wage-setting negotiations [34823339]. If the conflict spills over into other regions, the travel and tourism sectors could see a slowdown [34823339]. Central banks are facing a challenging situation as they try to navigate the economic impact of the Middle East conflict [34823339].
Christine Lagarde, the president of the European Central Bank, has expressed her concerns about the potential impact of the Israel-Hamas war on energy prices [5152aa33]. Lagarde stated that she is "very attentive" to the situation and the potential costs that could arise from the conflict [5152aa33]. The European Central Bank has maintained interest rates at a record high of 4% as officials closely monitor the developments in the Middle East [5152aa33]. The conflict has the potential to disrupt energy supplies and lead to a significant increase in energy prices, which could have economic consequences globally [5152aa33]. Lagarde's warning highlights the importance of closely monitoring the situation and its potential impact on the global economy [5152aa33].
Japan's government warns that the conflict in the Middle East could impact the economy through energy costs [cf552a55]. Rising energy prices have already burdened Japan's economy, which relies on imports for most of its energy needs [cf552a55]. The government adds the Middle East developments as a downside risk to the Japanese economy [cf552a55]. The recent attack by Hamas militants on southern Israel has raised concerns of a wider conflict [cf552a55]. The weakening Japanese currency, beyond 150 yen to the dollar, is seen as a danger zone that could trigger intervention [cf552a55]. Prime Minister Fumio Kishida's government plans to implement measures to cushion the economic blow from rising inflation [cf552a55]. Japan's assessment on business sentiment has improved moderately [cf552a55]. The Bank of Japan faces pressure to shift away from its bond yield control [cf552a55].