The crisis in the Middle East could damage the prospects for world growth and price stability. The possibility obviously cannot be ruled out, given the similarities which exist between the pattern of events now unfolding and the circumstances of the ‘oil shocks’ in 1973 and 1979. In preparing our forecasts, (in the first week of August) however, we have assumed that the effect of oil prices is relatively minor, and relatively short-lived. The possibility of a larger and more sustained rise is discussed in an annex to the chapter on the world economy.