Oil. A war. Then a surge in prices that triggers panic and threatens the economy. In a little over half a century, this scenario has repeated itself for the fifth time. This time, the price of a barrel has nearly doubled in two months and public opinion is panicking again.
The Iranian forces “will not allow” oil exports produced in the region to countries allied with the United States and Israel as long as the war in the Middle East continues, a spokesperson for the Revolutionary Guards recently stated.
About 20% of global oil supply passes through the Strait of Hormuz. If this chokepoint were closed for several months, oil prices could rise by about 80% compared with pre-conflict levels, reaching around $108 a barrel.
The rise in energy prices and transportation costs is exerting pressure not only on households and businesses, but could also shake financial markets already concerned by the surge in tech stocks tied to artificial intelligence (AI) and the impact of American tariffs.
The rise in oil prices is expected to weigh on real incomes and consumer spending
In a context of a still fragile global economy, a new shock to energy prices is seen as a major test of policymakers’ ability to devise responses and the resilience of the major economies.
Historically, central banks have not reacted directly to oil shocks, but have tended to tighten policy modestly when inflation is high or price shocks are large. However, policy could become more stringent—potentially delaying rate cuts in emerging markets—if oil prices reach $100 per barrel or if higher costs feed through to consumer prices at a rate higher than normal.
The officials of the European Central Bank (ECB) have warned that if the conflict intensifies and lasts longer, inflation in the eurozone could rise again and growth slow. Indeed, the baseline scenario assumes a short conflict, but in case of prolongation, inflation expectations could deteriorate.
Amine BEN GAMRA
Chartered Accountant
Statutory Auditor
Member of the Tunisian Order of Chartered Accountants
