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Yellen Urges Israel to Restore Economic Ties to West Bank

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Treasury Secretary Janet L. Yellen said on Tuesday that she had personally urged Prime Minister Benjamin Netanyahu of Israel to increase commercial engagement with the West Bank, contending that doing so was important for the economic welfare of both Israelis and Palestinians.Ms. Yellen’s plea was outlined in a letter that she sent to Mr. Netanyahu on Sunday. It represented her most explicit public expression of concern about the economic consequences of the war between Israel and Hamas. In the letter, Ms. Yellen said, she warned about the consequences of the erosion of basic services in the West Bank and called for Israel to reinstate work permits for Palestinians and reduce barriers to commerce within the West Bank.“These actions are vital for the economic well-being of Palestinians and Israelis alike,” Ms. Yellen said at a news conference in Brazil ahead of a gathering of finance ministers from the Group of 20 nations.The letter came as the cabinet of the Palestinian Authority, which administers part of the Israeli-occupied West Bank, submitted its resignation on Monday in hopes that it could overhaul itself in a way that would enable it to potentially take over the administration of Gaza after the war there ends. Negotiations between Israel and Hamas are also resuming in Qatar this week as mediators from that nation, along with the United State and Egypt, work on a deal to release some hostages being held by Hamas in Gaza in exchange for Israel’s agreeing to a temporary cease-fire.Senior Biden administration officials have been trying to mediate a resolution to the conflict in Gaza, which health authorities there say has killed approximately 29,000 Palestinians. Ms. Yellen has largely been focused on tracking the economic implications of the war and managing the sanctions that the Treasury Department has imposed on Hamas and those who are involved in its network of finances.While the Biden administration has been concerned about the humanitarian crisis unfolding in Gaza, it is increasingly worried that economic unrest in the West Bank could fuel violence and further deteriorate living standards there. The war has already taken a toll on Israel’s economy, which contracted by nearly 20 percent in the fourth quarter of last year.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Middle East War Could Cause Oil Price Shock, World Bank Warns

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    A major escalation of the war between Israel and Hamas — one that spilled over into a broader Middle East conflict — could send oil prices surging as much as 75 percent, the World Bank warned on Monday.The potential for a global energy shock in the wake of Hamas’s brutal attack on Israel has been a pressing question for economists and policymakers, who have spent the past year trying to combat inflation.Energy prices have remained largely contained since Hamas invaded Israel on Oct. 7. But economists and policymakers have been closely monitoring the trajectory of the war and studying previous conflicts in the region as they try to determine the potential scale of economic repercussions if the current conflict intensifies and broadens across the Middle East.The World Bank’s new study suggests that such a crisis could overlap with energy market disruptions already caused by Russia’s war in Ukraine, exacerbating the economic consequences.“The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s — Russia’s war with Ukraine,” Indermit Gill, the World Bank’s chief economist and senior vice president for development economics, said in a statement that accompanied the report. “If the conflict were to escalate, the global economy would face a dual energy shock for the first time in decades — not just from the war in Ukraine but also from the Middle East.”The World Bank projects that global oil prices, which are currently hovering around $85 per barrel, will average $90 per barrel this quarter. The organization had been projecting them to decline next year, but disruptions to oil supplies could drastically change those forecasts.The bank’s worst-case scenario is pegged to the 1973 Arab oil embargo that took place during the Arab-Israeli war. A disruption of that severity could remove as much as eight millions barrels of oil per day off the market and send prices as high as $157 per barrel.A less severe, but still disruptive, outcome would be if the war plays out as the 2003 war in Iraq, with oil supply being reduced by five million barrels per day and prices rising as much as 35 percent, to $121 a barrel.A more modest outcome would be if the conflict parallels the 2011 civil war in Libya, with two million barrels per day of oil lost from global markets and prices rising as much as 13 percent, to $102 per barrel.World Bank officials cautioned that the effects on inflation and the global economy would depend on the duration of the conflict and how long oil prices remained elevated. They said that if higher oil prices are sustained, however, that would lead to higher prices for food, industrial metals and gold.The United States and Europe have been trying to keep global oil prices from spiking in the wake of Russia’s invasion of Ukraine. Western nations introduced a price cap on Russia’s energy exports, a move aimed at limiting Moscow’s oil revenues while ensuring oil supply continued to flow.The Biden administration also tapped its Strategic Petroleum Reserve to ease oil price pressures. A senior administration official told The New York Times last week that President Biden could authorize a new round of releases from the nation’s Strategic Petroleum Reserve, an emergency stockpile of crude oil that is stored in underground salt caverns near the Gulf of Mexico.Biden administration officials have publicly downplayed their concerns about the economic impact of the conflict, saying it was too soon to predict the fallout. Treasury Secretary Janet L. Yellen noted at a Bloomberg News event last week that oil prices had so far been generally flat and that she had not yet seen signs that the war was having global economic consequences.“What could happen if the war expands?” Ms. Yellen said. “Of course there could be more meaningful consequences.” More

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    Yellen Says U.S. Is Considering New Sanctions on Iran and Hamas

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    Treasury Secretary Janet L. Yellen said on Wednesday that the Israel-Gaza war was a potential concern for the global economy and signaled that additional U.S. sanctions could be coming in response to the attack on Israel by Hamas.Questions about the economic impact of the war were growing as Ms. Yellen offered a forceful defense of Israel and pushed back on the notion that U.S. sanctions against Iran — a key backer of Hamas — have become too lenient. Ms. Yellen said the Treasury Department continued to review its sanctions on Iran, Hamas and Hezbollah, the Lebanese militant group that is also a longtime adversary of Israel.“We have not in any way relaxed our sanctions on Iranian oil,” Ms. Yellen said at a news conference on the sidelines of the annual meetings of the International Monetary Fund and the World Bank in Marrakesh, Morocco. “We have sanctions on Hamas, on Hezbollah, and this is something that we have been constantly looking at and using information as it becomes available to tighten sanctions.”She added: “We will continue to do that.”The Treasury secretary also did not rule out reversing a decision made last month — to unfreeze $6 billion of Iranian funds in exchange for the release of American hostages — if it is determined that Iran was involved in the attack by Hamas.At the time of the exchange, the United States informed Iran that it had transferred about $6 billion in Iranian oil revenue from South Korea to a Qatari bank account. The money is supposed to be used only for food, medicine and other humanitarian goods.“These are funds that are sitting in Qatar that were made available purely for humanitarian purposes, and the funds have not been touched,” Ms. Yellen said, adding: “I wouldn’t take anything off the table in terms of future possible actions.”The crisis in Israel poses a new challenge for the world economy and the Biden administration, which has spent the last year working to combat inflation in the United States and to corral energy prices that have become volatile because of Russia’s war in Ukraine. Another war in the Middle East complicates those efforts by threatening to constrain oil supplies and send prices higher.Ms. Yellen said geopolitical “shocks” continued to pose risks to the world economic outlook.“Of course, the situation in Israel poses additional concerns,” she said.Economic officials across the Biden administration are closely tracking developments in global oil markets this week. Global oil prices jumped on Monday after the terrorist attacks in Israel but were falling slightly on Wednesday. Administration officials are concerned that a sustained increase in the cost of crude could hurt economic growth and dent Mr. Biden’s approval rating, by pushing up the price of gasoline for American drivers.Ms. Yellen said she continued to believe that the U.S. economy could achieve a so-called soft landing — where inflation eases without a recession — but was closely watching for any economic fallout from the new conflict in the Middle East.“While we’re monitoring potential economic impacts from the crisis, I’m not really thinking of that as a major driver of the global economic outlook,” Ms. Yellen said. “We will see what impact it has. Thus far, I don’t think we’ve seen anything suggesting it will be very significant.”International policymakers gathered in Morocco for a week of meetings, as the global economic recovery is losing momentum. The prospect of a new regional conflict gave other policymakers more reason to feel anxious about a sluggish world economy that has been battered by war, a pandemic and inflation in recent years. Central banks around the globe have been raising interest rates to tame rapid inflation, and investors had begun to hope that a recent slowdown in price gains could signal an end to those rate increases.“I think central bank governors are concerned about what might happen to energy prices if the Israel-Gaza conflict were to turn into a bigger regional conflict and have implications for supply of oil on markets,” Gita Gopinath, the first deputy managing director of the I.M.F., said in an interview on Wednesday.Ms. Gopinath added that higher oil prices could elevate prices more broadly, complicating interest rate decisions for central bankers. She suggested that it was too soon to say how the economic impact of the conflict in the Middle East might compare with the effects of the war in Ukraine, but that overlapping crises were a headwind.“The geopolitical risks are certainly piling up in Russia’s invasion of Ukraine and we’re seeing now in Israel and Gaza,” she said.That sentiment was echoed on Wednesday by Ajay Banga, the World Bank president, who said at a news conference that he now expected interest rates to be “higher for longer” despite signs that inflation was cooling.“I believe that wars are completely and extremely challenging for central banks who are trying to find their way out of a very difficult situation,” Mr. Banga said.It is not yet clear what steps the Biden administration would take to contain oil prices if the Israel-Gaza war intensifies or how that might affect its efforts to curb Russia’s oil revenues.Ms. Yellen suggested on Wednesday that the “price cap” policy that the Group of 7 devised last year, which forbids Russia to sell oil over $60 a barrel using Western banking and insurance services, had been successful.“Global energy prices have been largely unchanged while Russia has had to either sell oil at a significant discount or spend huge amounts on its alternative ecosystem,” she said.Jim Tankersley More

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    Fragile Global Economy Faces New Crisis in Israel-Gaza War

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    A war in the Middle East could complicate efforts to contain inflation at a time when world output is “limping along.”The International Monetary Fund said on Tuesday that the pace of the global economic recovery is slowing, a warning that came as a new war in the Middle East threatened to upend a world economy already reeling from several years of overlapping crises.The eruption of fighting between Israel and Hamas over the weekend, which could sow disruption across the region, reflects how challenging it has become to shield economies from increasingly frequent and unpredictable global shocks. The conflict has cast a cloud over a gathering of top economic policymakers in Morocco for the annual meetings of the I.M.F. and the World Bank.Officials who planned to grapple with the lingering economic effects of the pandemic and Russia’s war in Ukraine now face a new crisis.“Economies are at a delicate state,” Ajay Banga, the World Bank president, said in an interview on the sidelines of the annual meetings. “Having war is really not helpful for central banks who are finally trying to find their way to a soft landing,” he said. Mr. Banga was referring to efforts by policymakers in the West to try and cool rapid inflation without triggering a recession.Mr. Banga said that so far, the impact of the Middle East attacks on the world’s economy is more limited than the war in Ukraine. That conflict initially sent oil and food prices soaring, roiling global markets given Russia’s role as a top energy producer and Ukraine’s status as a major exporter of grain and fertilizer.“But if this were to spread in any way then it becomes dangerous,” Mr. Banga added, saying such a development would result in “a crisis of unimaginable proportion.”Oil markets are already jittery. Lucrezia Reichlin, a professor at the London Business School and a former director general of research at the European Central Bank, said, “the main question is what’s going to happen to energy prices.”Ms. Reichlin is concerned that another spike in oil prices would pressure the Federal Reserve and other central banks to further push up interest rates, which she said have risen too far too fast.As far as energy prices, Ms. Reichlin said, “we have two fronts, Russia and now the Middle East.”Smoke rising from bombings of Gaza City and its northern borders by Israeli planes.Samar Abu Elouf for The New York Times Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, said it’s too early to assess whether the recent jump in oil prices would be sustained. If they were, he said, research shows that a 10 percent increase in oil prices would weigh down the global economy, reducing output by 0.15 percent and increasing inflation by 0.4 percent next year. In its latest World Economic Outlook, the I.M.F. underscored the fragility of the recovery. It maintained its global growth outlook for this year at 3 percent and slightly lowered its forecast for 2024 to 2.9 percent. Although the I.M.F. upgraded its projection for output in the United States for this year, it downgraded the euro area and China while warning that distress in that nation’s real estate sector is worsening.“We see a global economy that is limping along, and it’s not quite sprinting yet,” Mr. Gourinchas said. In the medium term, “the picture is darker,” he added, citing a series of risks including the likelihood of more large natural disasters caused by climate change.Europe’s economy, in particular, is caught in the middle of growing global tensions. Since Russia invaded Ukraine in February 2022, European governments have frantically scrambled to free themselves from an over-dependence on Russian natural gas.They have largely succeeded by turning, in part, to suppliers in the Middle East.Over the weekend, the European Union swiftly expressed solidarity with Israel and condemned the surprise attack from Hamas, which controls Gaza.Some oil suppliers may take a different view. Algeria, for example, which has increased its exports of natural gas to Italy, criticized Israel for responding with airstrikes on Gaza.Even before the weekend’s events, the energy transition had taken a toll on European economies. In the 20 countries that use the euro, the Fund predicts that growth will slow to just 0.7 percent this year from 3.3 percent in 2022. Germany, Europe’s largest economy, is expected to contract by 0.5 percent.High interest rates, persistent inflation and the aftershocks of spiraling energy prices are also expected to slow growth in Britain to 0.5 percent this year from 4.1 percent in 2022.Sub-Saharan Africa is also caught in the slowdown. Growth is projected to shrink this year by 3.3 percent, although next year’s outlook is brighter, when growth is forecast to be 4 percent.Staggering debt looms over many of these nations. The average debt now amounts to 60 percent of the region’s total output — double what it was a decade ago. Higher interest rates have contributed to soaring repayment costs.This next-generation of sovereign debt crises is playing out in a world that is coming to terms with a reappraisal of global supply chains in addition to growing geopolitical rivalries. Added to the complexities are estimates that within the next decade, trillions of dollars in new financing will be needed to mitigate devastating climate change in developing countries.One of the biggest questions facing policymakers is what impact China’s sluggish economy will have on the rest of the world. The I.M.F. has lowered its growth outlook for China twice this year and said on Tuesday that consumer confidence there is “subdued” and that industrial production is weakening. It warned that countries that are part of the Asian industrial supply chain could be exposed to this loss of momentum.In an interview on her flight to the meetings, Treasury Secretary Janet L. Yellen said that she believes China has the tools to address a “complex set of economic challenges” and that she does not expect its slowdown to weigh on the U.S. economy.“I think they face significant challenges that they have to address,” Ms. Yellen said. “I haven’t seen and don’t expect a spillover onto us.” More