Soaring oil prices could lead to soaring inflation and a heavy economic hit

Morgan Stanley believes that crude oil is often a key factor in cyclical economic downturns, and the political strife in Russia and Ukraine further increases the risk of a surge in oil prices this quarter.

Mainstream investment banks now expect oil prices to rise to $100. A surge in crude oil above $150 this quarter would erode economic growth significantly and trigger a surge in inflation.

Soaring oil prices will slow global growth for at least three quarters, from 4.1% to around 0.9% in the first half of the year. Meanwhile, global inflation will soar to 7.2% from 3%, forcing central banks to tighten policy more aggressively.