There’s an inflation wave coming - what does the Iran war...

What’s Happening

Let’s talk about Economic consequences are an intrinsic aspect of the Iran conflict, writes BBC economics editor Faisal Islam.

Theres an inflation wave coming. 14 hours ago Save Faisal Islam Economics editor Save Up until late on Thursday the rise in global oil markets appeared to be more of an yikes bump than imminent oil shock. (it feels like chaos)

The immediate response to the closure of the Strait of Hormuz, a 10% price increase, appeared rather benign for what was long-assumed to be the oil markets nightmare scenario.

The Details

On Friday the situation changed, pennies kicked off to drop. The intervention from the Qatari Energy minister Saad al-Kaabi that all Gulf energy providers were likely to halt export in days, and $150 a barrel of oil was coming, sparked oil markets into life.

Crude oil wrapped up up 27% since the conflict began. Derivative petrochemical products vital for livelihoods, and industrial supply chains that are also dependent on free passage in the Gulf, from jet fuel, to urea, are also spiking in price.

Why This Matters

While this is not yet an energy shock, the markets are starting to assume worse scenarios if not yet the worst case. It clutchedt take much for oil to breach the $100 barrier next week. Iran has not actually formally closed the Strait.

This reflects broader trends we’re seeing in the business world right now.

Key Takeaways

They have de facto been closed voluntarily as insurance costs soar, and sailors fear for their safety.
The extent of that mismatch has surprised me, four days on from the Spring Statement and a week into this conflict.