The conflict in the Middle East threatens to disrupt the oil supply and subsequently hurt global economic growth in 2024, Fitch Ratings has warned.

In a report on Friday, the agency outlined a potential scenario with higher-than-expected oil prices, which is expected to curb world GDP growth by 0.4 percentage points next year.

Fitch’s previous forecast suggested that oil would average $75 per barrel in 2024 and $70 in 2025. However, the conflict in the Middle East has changed all that. “Our scenario assumes that, due to supply restrictions, oil prices average $120/bbl in 2024 and $100/bbl in 2025,” it added.

“Higher oil prices would dampen GDP growth in almost all the Fitch 20 (economies it forecasts), although the impact would largely dissipate in 2025,” Fitch wrote, noting that growth in the US, the Eurozone and Japan would ebb 0.5 percentage points in 2024.

It also assumed that the largest impacts among the main emerging market countries would be in South Africa and Türkiye.

“Russia, and to a much lesser extent Brazil, would see a positive impact due to the important role of oil production in these economies,” the report noted.

Higher oil prices would lead to higher-than-expected inflation rates in 2024, followed by corrections in 2025, according to the ratings agency. The inflation impact would be short-lived and partly offset by lower-than-forecast inflation rates in 2025.

“An oil price shock related to the Middle East conflict could be accompanied by tighter financial conditions, lower business and consumer confidence, and corrections in financial markets,” Fitch concluded.

The Middle East found itself in the throes of renewed violence on October 7, when the Palestinian armed group Hamas launched a surprise attack on Israel, killing over 1,200 people. Israel’s retaliatory bombardment of Gaza has led to over 10,000 deaths so far, according to Palestinian authorities. The biggest threat to the global economy comes from the potential of the conflict spreading to other countries in the region.