According to a top economist, if ongoing political turmoil in North Africa and the Middle East pushes crude oil prices to USD 120 per barrel or more permanently, the global recovery from the worst recession since the 1930s would be hampered.

The unrest that has swept from Tunisia to Yemen, Algeria, Bahrain and Iran is fanning the advance of oil prices which have surpassed USD 96 per barrel in New York

According to Morgan Stanley, the global economy may tip back into recession if oil prices reach USD 120 because of unrest in the Middle East and North Africa.

Libya’s escalating violence represents the biggest threat to global oil supplies since the invasion of Iraq eight years ago as political unrest sweeping the Middle East centers on a member of the Organization of Petroleum Exporting Countries or OPEC.

Oil prices jumped to the highest in more than two years in New York as Libya’s violent uprising threatened to disrupt exports from Africa’s third-biggest supplier and spread to other crude producing nations in the Middle East. Crude for April delivery gained as much as 0.7% to USD 96.08 per barrel in New York. Oil has rallied 9.2% since January 24, the day before the first anti government protests erupted in Egypt.

Mr Jonathan Garner Morgan Stanley’s chief Asia and emerging market strategist said that “If you go above USD 120 on a sustainable basis, you will have a meaningful shortfall in global growth relative to what the current consensus expects.”

Garner joins economists at Mirae Asset Securities in saying another jump in oil prices could stall global growth. Political unrest that has swept from Tunisia to Yemen, Algeria, Bahrain and Iran in the past four weeks is fanning oil’s advance at a time when the world economy is emerging from the deepest recession in more than 50 years.

(Sourced from Bloomberg)