Middle East crisis puts global economy at risk, warn Jamie Dimon and Larry Fink

JP Morgan CEO Jamie Dimon

A global recession could be triggered by the conflict in the Middle East as the humanitarian crisis compounds the challenges facing an already precarious world economy, two of Wall Street’s biggest names have warned recently.

Larry Fink, chief executive of the world’s largest asset manager, BlackRock, said a combination of the Hamas atrocities of October 7, Israel’s resultant attack on Gaza and Russia’s invasion of Ukraine last year had pushed the world “almost to a whole new future”.

In a separate interaction, while agreeing with this prognosis, Jamie Dimon, the chair of America’s biggest bank, JP Morgan, added that the world is facing a crisis that is “arguably the most serious since 1938”.

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Rising fear creates a withdrawal from consumption or extra spending: Larry Fink

In an interview with the Sunday Times, Fink stated, “When the Russian invasion occurred in Ukraine, we said that the peace dividend is over. Geopolitical risk is a major component in shaping all our lives. We are having rising fear throughout the world, and less hope. Rising fear creates a withdrawal from consumption or spending more. So fear creates recessions in the long run, and if we continue to have rising fear, the probability of a European recession grows and the probability of a US recession grows.”

Israel-Hamas war and Russia-Ukraine war are quite scary: Jamie Dimon

Dimon, the chair of America’s biggest bank, JP Morgan, told the same newspaper that the combination of Israel’s war on Hamas and Russia’s invasion of Ukraine were “quite scary and unpredictable”.

“Here in the US we continue to have a strong economy. We still have a lot of fiscal and monetary stimulus in the system. But these geopolitical matters are very serious—arguably the most serious since 1938,” he said. “What’s happening on the geopolitical front right now is the most important thing for the future of the world—freedom, democracy, food, energy, immigration.”

The comments come three weeks after similarly ominous remarks from Dimon, who is one of the world’s best-known business executives and banker. Three weeks ago, he issued a warning that the world may be living through “the most dangerous time the world has seen in decades”, with the escalating conflict potentially having “far-reaching impacts” on energy prices, food costs, international trade and diplomatic ties.

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At the bank’s most recent update to Wall Street last month, Dimon stated, “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. This may be the most dangerous time the world has seen in decades.”

In the same vein, negative Wall Street sentiments about the global economy have been echoed by other professional investors, hedge fund managers and bankers like Ray Dalio and Stanley Druckenmiller, among others. It is also to be noted that amid the ongoing turmoil in the global economy, the US benchmark Dow Jones index has remained flat for the past one year and has given a return of less than 3 percent over the same duration.