Inflation fears return as Iran war keeps oil prices high: analysts
Analysts warn that escalating U.S.-Iran tensions are keeping oil prices high, which threatens to reignite global inflation. Financial experts suggest that central banks, particularly the Federal Reserve, may maintain hawkish interest rate policies to combat these renewed energy-driven price pressures.
Why it matters
Persistent inflation and high energy costs could destabilize global markets and force central banks to keep interest rates elevated, impacting borrowing costs for businesses and consumers.
Inflation fears are back on the table, amid worries over escalating tensions between the U.S. and Iran in the Middle East conflict which has kept oil prices elevated, according to analysts.
BlackRock estimates that the conflict will add around 0.8 percentage points to global headline inflation, though the impact may not be uniform across all regions.
Europe and parts of Asia, which are more reliant on energy imports, will remain more exposed to global headline inflation, BlackRock said in a note.
OCBC agreed, in a report saying that "with labor market data pointing to stabilization rather than deterioration, a fresh energy shock would leave the Fed focused on upside inflation risks."
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