Oil prices and the woes of the alternative asset industry are closely intertwined. While the private credit and PE sectors alone may not trigger the next global economic crisis, when combined with higher oil prices, higher inflation and sluggish growth, the two might just push economies around the globe into the sort of crisis the world last witnessed in 2008.
For nearly three weeks, the world has been fixated on US and Israeli strikes on Iran, soaring oil prices and the closure of the Strait of Hormuz, through which one-fifth of global oil consumption and a third of crude oil trade pass each day.
While oil risk is inflationary, squeezing consumers, raising corporate costs, and complicating the US Federal Reserve’s ability to cut interest rates, a much bigger problem is now brewing with the slow implosion of the private credit sector, which in turn threatens to shake up the closely linked private equity (PE) industry.
