The escalation of violence in Iraq over the past week or so has led to concerns that unrest in the Middle East might trigger another spike in oil prices. As it happens, the impact on world oil markets has so far been limited. But a sharp rise in prices from here would hit some of the most vulnerable Ems – including three of the so-called “Fragile Five” – hardest. At the same time, the big winners would be in the Middle East – although higher prices would be likely to manifest themselves in larger surpluses rather than faster real GDP growth.
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