Experts Warn Financial Markets are Misguided, Major Recession Looming Soon
Jakarta, CNBC Indonesia - Global financial markets are considered to be lulled by misguided euphoria amid the surge in energy prices due to the Iran conflict. Several experts warn that this situation could drag the world economy towards a major recession in the near future.
Amrita Sen, Founder and Director of Market Intelligence at Energy Aspects, believes that investors are currently underestimating the serious impact of the oil price shock. She notes that stock markets are instead showing resilience that does not align with the fundamental conditions.
“This is the biggest puzzle for us. Oil prices should be higher and stock markets much weaker,” Sen told CNBC International, quoted on Tuesday (5/5/2026).
“I think we are sleepwalking into a fairly large potential recession.”
Even as energy costs have surged sharply, the S&P 500 index has hit an intraday all-time high of 7,230.12 on 1 May. This rise occurred amid oil prices jumping more than 50% since the US-Iran conflict erupted at the end of February.
According to Sen, there is “very misguided euphoria” among global investors who believe the energy crisis will have limited impact, particularly on Asia. However, disruptions to oil supply could spread widely and hit the global economy comprehensively.
She also highlighted OPEC’s promise to increase oil production. However, she believes this step is still far from sufficient to replace the lost supply due to the conflict.
Sen emphasised that the key lies in the condition of the Strait of Hormuz. If this vital route remains disrupted, the world would face a drastic drop in oil demand of up to 10 million barrels per day, a level last seen in 2013.
“This is a major challenge. We might even need higher oil prices to suppress demand,” she said.
Looking ahead, Sen forecasts crude oil prices in the range of US$80-90 per barrel, equivalent to about Rp1.36 million to Rp1.53 million per barrel, as the new lower bound. Prolonged high prices are predicted to spread to various sectors, from LNG and chemicals to fertilisers.
“Just wait until food prices start to rise, due to disruptions in urea transportation and limited gas supply for the fertiliser sector,” she also warned of the subsequent impact on food prices.
“This is a massive energy crisis,” she added.
Similar signals were also conveyed by Jens Eisenschmidt, Chief European Economist at Morgan Stanley. He sees pressure starting to be felt broadly across various sectors, including the aviation industry facing potential jet fuel shortages.
“Tensions are increasing in the system. I think we are approaching the day of reckoning,” Eisenschmidt said.
Global oil prices continue to climb. Brent crude was recorded at US$111.23 per barrel (about Rp1.89 million), while West Texas Intermediate (WTI) reached US$104.16 per barrel (about Rp1.77 million).
Eisenschmidt added that if the conflict does not subside soon, the chances for central banks like the European Central Bank to control inflation will become even smaller. Even the risk of additional interest rate hikes is increasingly open.
“We really need to pay attention to the next one to two weeks. If there is no solution, I think an interest rate hike by the ECB (European Central Bank) will be hard to avoid,” he said.