"Assessing the Risk of Another Energy Price Shock on the Economy"

The UK Treasury has warned of a potential recession due to disruptions in the Red Sea, with fears of a $10 per barrel increase in crude oil prices and a 25% rise in natural gas prices. Recent military actions against Iran-backed Houthi rebels aim to restore safe passage through the Red Sea, but there is a risk of escalation to a wider Middle East conflict. The potential for another energy shock looms, with the possibility of $100 per barrel oil prices, as Europe becomes more reliant on gas supplies from Qatar following the halt of Russian pipelines. Such an escalation could entrench inflation and disrupt the global economy, echoing parallels with the 1970s energy shocks.