The global spike in energy prices, starting with lifting of coronavirus-induced restrictions and intensifying with the Russian war against Ukraine, has been the largest since the 1973 oil crisis. The historic highs in the prices of oil, gas and coal have triggered the risk of what economists call stagflation.

Stagflation happens when all three major macroeconomic variables—gross domestic product, unemployment and inflation—are going in the wrong direction. It occurs when a stalling or falling GDP, an escalating inflation and an outpouring unemployment hit an economy simultaneously.

Stagflation is attributed most frequently to a negative supply shock, when something crucial to the entire economy is suddenly in short supply or becomes expensive. The war-induced spike in energy prices, causing a slowdown in global economy, is projected to be an economic nightmare for the entire world.