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"The Bigger Problem Than AI Is Rising Oil Prices"
If International Oil Prices Keep Rising, Recession Risks Will Increase
Lower Oil Prices Would Also Ease Concerns About AI Investment

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Amid a continued decline in the stock market, analysts say stabilizing international oil prices is just as urgent as easing concerns over AI profitability to spur a market rebound.

On Oct. 24, IBK Investment & Securities said the Korean stock market is currently reflecting two risks at once: growing semiconductor industry risks amid concerns about the AI sector from a bottom-up perspective, and growing risks to the global economy from next year onward amid concerns about rising international oil prices from a top-down perspective.

Oil prices have continued to rise because the collapse of a memorandum of understanding (MOU) between the United States and Iran on ending the conflict, combined with escalating clashes between the Houthis and Saudi Arabia, is raising the prospect of a wider conflict. Unlike in the past, when oil prices generally fell as the Northern Hemisphere driving season ended after the fourth quarter, international oil prices are continuing to face upward pressure. If international oil prices break above their March peak, concerns about a prolonged period of high oil prices are expected to intensify, further increasing uncertainty over the economic outlook from next year onward.

Byun Junho, an analyst at IBK Investment & Securities, stressed, "For the market to stage a meaningful rebound, concerns over oil prices and the AI sector need to ease together. Even to achieve short-term stability, at least one of the two concerns needs to start easing."

Byun noted, "Oil prices need to stabilize for optimism about next year's global growth outlook to be sustained. Lower oil prices could also stabilize interest rates at lower levels, easing concerns over AI investment and financing."

The global growth forecast is currently expected to rebound from 3.0% this year to 3.1% next year, an outlook that fundamentally assumes stable oil prices. Against this backdrop, a further rise in oil prices is expected to ultimately hurt both the economy and AI.

Byun explained, "In past periods when oil prices rose due to supply disruptions, global growth slowed in both the following year and the year after. Unlike those past patterns, the current outlook reflects optimism that growth will rebound. If oil prices continue to rise, the outlook will likely come to reflect a pattern similar to those seen in the past, with an economic slowdown following a period of high oil prices and high interest rates, raising the likelihood of downward revisions to the global growth outlook from next year onward."

He said, "Since the start of the fourth quarter, U.S. market interest rates have fallen sharply despite the continued rise in oil prices. Although falling interest rates have generally been favorable for the stock market, the fact that rates are declining even as oil prices rise suggests that this could ultimately be interpreted as a sign of economic concern and a flight to safe assets."

This content was produced with the assistance of AI translation services.