Analysts at Citigroup fear that as financial markets find themselves under the influence of a strong U.S. dollar, lower commodity prices, weak trade and declining growth in emerging markets, they have become trapped in a "death spiral" that could lead to further weakness in oil prices and global recession.
"It appears that four inter-linked phenomena are driving a negative feedback loop in the global economy and across financial markets," the analysts wrote in a report released Friday, according to Bloomberg.
They warned that the world could slip into "significant and synchronized" global recession if the loop continues.
The bank even invented a new term to emphasize the gravity of the situation: "Oilmageddon."
"It seems reasonable to assume that another year of extreme moves in U.S. dollar (higher) and oil/commodity prices (lower) would likely continue to drive this negative feedback loop," the analysts add, according to CNN, "[and] make it very difficult for policy makers in emerging markets and developing markets to fight disinflationary forces and intercept downside risks."
"Corporate profits and equity markets would also likely suffer further downside risk in this scenario of Oilmageddon," the analysts added.
Crude oil prices have dropped by around 70 percent since mid-2014, to just over $31 per barrel. In contrast, the U.S. dollar has risen by about 20 percent within the same period.
The collapse in prices gave a boost to the countries like China that import oil. However it has hurt global economy as a whole due to slowdowns in trade and capital flows.
Despite this grim outlook, Citi still says there's some light at the end of tunnel, forecasting that the dollar would weaken in 2016 and that oil prices were likely bottoming, according to CNBC.
"The death spiral is in nobody's interest. Rational behavior, most likely, will prevail," they said.
