The attack on Israel must lead to an uptick in inflation

A 10 per cent increase in oil prices translates to a 0.15 per cent loss of global GDP and a rise of 0.4 per cent in global inflation, says Gita Gopinath, deputy managing director of the IMF. Before Hamas launched its assault on Israel on 7 October, the Brent Crude barrel price had already moved 20 per cent above its summer level of $75 and pundits were predicting $100, based on prospects of tighter supply from Saudi Arabia and Russia.

Natural gas prices have also risen sharply with winter approaching – and no one knows how escalation of the latest Middle East conflict might affect other energy flows and supply chains. But it will clearly add a notch to inflation, forcing interest rates to stay higher for longer, denting investment confidence and increasing the likelihood of the recession which many UK economists sense is already in the air – a sense reinforced by recent flatlining of growth and cooling in the jobs market.