Introduction: Oil crisis risks 'broader stagflationary shock' as Brent hits $100 again
Good morning and welcome to our rolling coverage of business, the financial markets and the world economy.
Hopes that the market turmoil in the energy sector might have eased are diminishing rapidly today, as Iran intensifies its assaults on infrastructure and transport networks throughout the Gulf region.
The oil price surged following the early morning arson of two tankers in Iraqi waters, coinciding with warnings from senior Iranian officials of a prolonged “war of attrition” that could destabilize the global economy.
Additionally, reports indicate that Oman’s key oil export terminal has been evacuated amid these escalating tensions.
These extensive Iranian attacks on Middle Eastern energy facilities propelled Brent crude above the $100 per barrel threshold once again early today, reaching $101.59 a barrel before retreating slightly to $97.50 a barrel, marking a 6% increase for the day.
The rise in oil prices is intensifying concerns that the global economy may be pushed into stagflation – a challenging scenario characterized by rising prices coupled with stagnant economic growth.
Brent crude pops back toward $100 because, well, hard to say why it wasn’t there already pic.twitter.com/SGjbVYODt2
Yesterday’s announcement has failed to alleviate fears of significant supply shortages should navigation through the Strait of Hormuz remain obstructed.
Jim Reid, market strategist at Deutsche Bank, highlights the growing risk of a “broader stagflationary shock” for investors:
From a market perspective, the problem is that investors are increasingly pricing in a more protracted conflict that causes extensive economic damage. After all, with no concrete signs of de-escalation yet, that’s keeping oil prices elevated, and raising the risk of a broader stagflationary shock. Indeed, we know that investors are pricing in the longer scenarios, because the 6-month Brent future is also up +3.06% this morning to $82.97/bbl, and with each passing day it gets harder to argue that the disruption to shipping and energy infrastructure will only prove temporary.
Daniel Casali, chief investment strategist at UK wealth manager Evelyn Partners, notes that geopolitical factors are increasingly influencing markets over fundamental economic indicators, stating:
The conflict is potentially a stagflationary shock the severity of which depends on its length and export volumes while the SoH remains closed. Oil inventories buy time, but as they erode, risks of higher energy prices, rising inflation and market volatility increase.
The agenda
9.30am BST: Governor of the Bank of England Andrew Bailey delivering opening remarks at the Financial Stability Board
11am GMT: Turkey interest rate decision
12.30pm GMT: US weekly jobless claims report
The ongoing conflict has also led Goldman Sachs to revise its forecast for the US Federal Reserve’s rate cuts, now anticipating quarter-point reductions in September and December, a delay from the previously expected start in June.
Goldman Sachs raises oil price forecasts
Goldman Sachs has increased its oil price forecasts for the end of this year, concluding that disruptions to oil flows through the Strait of Hormuz will be more prolonged than initially expected.
The investment bank raised its forecast for Brent crude, the international benchmark, to $71 per barrel in the fourth quarter of 2026, up from $66 per barrel. The forecast for US crude oil now averages $67 in Q4, an increase from $62, according to .
In a note released on Thursday, Goldman analysts stated they now anticipate 21 days of reduced Strait of Hormuz oil flows at 10% of normal levels, followed by a 30-day gradual recovery, compared to their earlier expectation of a 10-day disruption.
Brent crude is expected to average $98 per barrel in March and April but could surge to $110 in an 'upside risk scenario' where flows through the strait are disrupted for a month.
