America at Risk of Recession Amidst War?

You don’t get to be the chief executive of JP Morgan Chase by making frivolous claims or predictions. 

In fact, the top dog at the largest financial services company must be careful about what he says. His statements can have a huge impact on the economy.

Recently Jamie Dimon told investors the world may be facing “the most dangerous time… in decades.” So, people took notice.

And not only investors. It’s anyone who pays for anything. Including groceries, utilities, and gas for vehicles. We should be aware that wars in the Middle East and Ukraine affect our finances.

Economies Are at Risk

Dimon warned those wars could increase energy and food prices. As well as global trade. Especially if they escalate.

He said these geo-political tensions could put the economies of the world at risk. Including ours.

“My caution is that we are facing so many uncertainties out there,” Dimon said. He suggested that higher interest rates and increased inflation are possibilities.

“The war in Ukraine compounded by (the) attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships.” 

Will the Middle East War Go Regional? 

The JP Morgan Chase CEO condemned the attacks by Hamas against Israel. He said his bank is standing with “the people of Israel.” 

He added, “Terrorism and hatred have no place in our civilized world. And all of our hearts here at JP Morgan Chase go out to all who are suffering.” 

As horrible as the Israel-Hamas war is – 6,000 deaths so far and many more injured – it’s mostly contained within Israel and Gaza. 

But what if Iranian-backed militants from other countries get involved? Including from Syria and Lebanon. We could see increased U.S. involvement. Which would put our troops in more danger.

A regional war including the world’s largest oil-producing countries will likely increase gas prices. It would also greatly affect the global supply chain. Which would cause significant shipment delays and higher costs. 

Recession Could Be on Horizon 

Now, there is no exact formula for what will cause prices to increase. Here’s an example. During the 50-day war between Hamas and Israel in 2014, financial markets were unaffected.

But oil prices rose globally when Israel and Hezbollah battled in Lebanon. There were concerns the 2006 conflict would turn into a regional war.

There is a distinct possibility of inflation increasing. Financial experts are also concerned about an economic recession.

Global fears could convince people to spend and invest less. Which can be a big part of causing a recession. 

War in Ukraine Affects Food Prices

But we don’t have to look back to 2006 or 2014 to recall economic problems associated with a war. Even if that war occurs thousands of miles away from America.

After Russia invaded Ukraine in 2021, prices for wheat and other commodities rose. Those countries are two of the world’s largest wheat producers. 

And the snowball effect caused supply chain problems. As well as inflated prices for a variety of foods containing wheat.

Some blame that war for extending inflation problems in America. Otherwise, our inflation might have improved more over the past two years.

Pray for the Best… Prepare for the Worst

The Israel-Hamas war is likely to raise oil prices. The ongoing Ukraine war will likely contribute to keeping food prices high.

It’s a double whammy. And it’s one of the reasons Dimon and other financial experts are warning about potential rough times ahead. 

Neither war appears to have an ending in sight. More than 1,400 people in Israel died from the original Hamas attack, while the death toll has passed 5,000 in Gaza.

Many others are suffering physically and emotionally. Including family members of hostages being held by Hamas in horrible conditions.

It’s an understatement to call the world an uncertain place right now. The only advice I can provide is to make sure you’re prepared for even more uncertainty ahead. Please protect yourself and your family, and pray for peace.