Inflation threatens again due to oil and a geopolitical shock
The sudden return of energy to the centre of the global economic story once again opens a question that had seemed partially closed at the beginning of the year: is inflationary pressure returning at the very moment when central banks had begun to count more seriously on a gradual easing of monetary policy. In recent days, markets have received a very clear signal that the earlier scenario of calmer price movements can change quickly when a geopolitical shock hits oil, transport and consumer expectations. That is precisely why the new rise in crude oil prices is no longer just a topic for energy analysts, but also for households, employers, investors and governments that once again have to reckon with the possibility of more expensive fuel, more expensive transport and a slower lowering of interest rates.
The U.S. Energy Information Administration announced on March 10 that the price of Brent jumped from an average of 71 dollars per barrel on February 27 to 94 dollars on March 9, following the start of military escalation in the Middle East and a severe disruption of traffic through the Strait of Hormuz. The same institution warns that Brent could remain above 95 dollars during the next two months, before a possible weakening in the second part of the year, but with the explicit reservation that everything depends on the duration of the conflict and the scale of supply disruptions. In other words, the market has already received a price shock, but it still has not received an answer to the question of whether this is a short-lived blow or the beginning of a new period of heightened energy instability.
Oil is once again the key channel transmitting the crisis into prices
When energy suddenly becomes more expensive, the effect does not stop at petrol stations. Fuel directly enters the cost of transporting goods, air traffic, logistics, agricultural production and part of industry, and indirectly spills over into a broader range of consumer prices. That is precisely why central banks usually do not look only at the current jump in inflation, but also at the question of whether more expensive energy will spill over into services, wages and inflation expectations. If households and companies conclude that prices will again rise for longer, then both consumer decisions and pricing policy change, and that is the scenario monetary authorities most want to avoid.
Until a few weeks ago, it seemed that the global disinflation process was nevertheless advancing. Eurostat data showed that annual inflation in the euro area in January amounted to 1.7 percent, while energy at that time had a negative contribution to overall inflation. In the United States, according to the U.S. Bureau of Labor Statistics, overall inflation in January amounted to 2.4 percent year on year, with 2.5 percent for core inflation excluding food and energy. Those data pointed to a continuation of price stabilisation, although not at the same speed in all segments of the economy. But the energy shock has meanwhile opened a completely new chapter, because the market is now no longer debating only how much inflation has fallen, but how quickly it could return.
The Strait of Hormuz has once again become a global economic pressure point
The central problem is not only the level of the oil price itself, but the sensitivity of global supply to every disruption in the Middle East. The Strait of Hormuz is one of the world’s most important routes for the export of crude oil and liquefied gas, so every threat to tanker passage almost instantly becomes a market event as well. In its March projections, the EIA starts from the assumption that the effective closure of that route has already reduced deliveries and caused an additional shutdown of part of production in the region. That is enough to change the balance in the market even before real physical shortages are felt in all importing countries.
That is precisely why even official forecasts currently have an unusually wide range of uncertainty. The same document from the American energy administration stresses that the entire price scenario is extremely sensitive to the length of the conflict and the speed of the return of navigation through the strait. This means that the market is no longer valuing only supply and demand in the usual sense, but also political and security risk. When that risk is built into futures prices, the costs of protection against future price increases rise, and that additionally burdens companies that depend on fuel and transport.
OPEC+ is trying to calm the market, but it is not removing the main risk
An important detail for understanding the current situation is also the decision of eight OPEC+ members from March 1. The group led by Saudi Arabia and Russia announced that from April it will continue the gradual removal of part of the voluntary production restrictions and that the adjustment will amount to 206 thousand barrels per day. The organisation stressed that it retains full flexibility and that it can increase, stop or reduce production again depending on market conditions. The message is clear: producers want to show that they have a tool for reaction, but at the same time they admit that conditions are unstable and that caution is necessary.
That decision in itself does not guarantee calmer prices. If the problem lies above all in transport security and possible regional disruptions, additional quantities on paper are not enough to immediately restore a sense of stability. The market therefore very carefully separates the nominal increase in production from the actual ability to deliver the raw material to buyers without major interruptions. In practice, this means that even with a formally larger production plan, the price can remain elevated if investors assess that geopolitical risk is still dominant.
Central banks are once again measuring how much inflation is truly under control
In the statement after the meeting on March 6, the European Central Bank states that annual inflation in February amounted to 2.4 percent, after 2.5 percent in January, and that energy remains a source of changes in projections. The ECB explicitly warns that geopolitical tensions create two-sided inflation risks through energy markets, consumer confidence and business investment. In the same statement, the bank estimates that average inflation in the euro area should amount to 2.3 percent in 2025, 1.9 percent in 2026 and 2.0 percent in 2027, but with the note that higher assumptions about energy prices had already been sufficient for a revision of part of the projections.
This is an important signal because the ECB is not speaking only about one short price increase, but about the mechanism through which energy can change the broader picture of monetary policy. If the rise in fuel prices proves transitory, the central bank can more easily continue with a milder approach. But if energy pushes overall inflation up again, and then the pressure spills over into other segments, every new rate cut becomes more sensitive both politically and economically. In other words, the geopolitical удар on energy does not currently mean an automatic turn in monetary policy, but it does mean that the room for more relaxed decisions is no longer as wide as it seemed at the beginning of the year.
A similar caution is visible in American messages as well. At the end of January, the Federal Reserve kept the target interest rate in the range of 3.5 to 3.75 percent and stressed that uncertainties around the economic outlook remain elevated. The Fed said that it will base its decisions on incoming data, inflationary pressures, expectations and international developments. Such wording now gains additional weight because international developments are no longer just a background risk, but a concrete channel through which energy products can once again push prices higher in the world’s largest economy.
Households feel the blow first, but the consequences are broader than fuel
For citizens, the most visible part of the problem is the rise in petrol and diesel prices, but the real effect is usually much broader. More expensive fuel can raise the price of delivery, travel, airline tickets, food and a series of everyday services. Employers at the same time receive a new cost pressure at a moment when part of the economies had only just begun to adapt to lower inflation and somewhat more favourable financing conditions. If companies assess that the price increase is permanent, they will try to pass it on to final prices. If, however, they assess that it is a short shock, a greater part of the burden could temporarily end up in margins and investment plans.
It is precisely that uncertainty that is the reason why markets are behaving nervously. Shares sensitive to consumption and transport are particularly exposed to a scenario in which households once again begin postponing larger spending, while at the same time the costs of input raw materials are rising and credit remains relatively expensive. For governments, the problem is twofold: more expensive energy can increase fiscal pressure through possible support measures or political pressure for intervention in the fuel market, while at the same time reducing the room for a looser budgetary policy.
Global growth has not yet been broken, but geopolitical risk is becoming more serious
In its January update of the world outlook, the International Monetary Fund estimated that global growth in 2026 should amount to 3.3 percent, with the expectation of a further decline in global inflation. However, the IMF clearly stated that among the key negative risks remains an escalation of geopolitical tensions. Translated, the baseline scenario for the world economy is still not a scenario of a new recession, but it is a scenario in which political and security shocks can very quickly worsen the inflation and investment picture.
This is especially important for Europe, which remains sensitive to external energy shocks. Although Europe’s dependence on Russian energy changed significantly after 2022, the continent is still exposed to global prices of oil and liquefied gas. Every major disruption in the Middle East therefore acts not only through the price of crude oil, but also through the broader expectation regarding the costs of energy, production and transport. When such a shock hits an economy that still does not have strong investment momentum, the result can be a combination of weaker growth and more stubborn inflation.
Why markets are now looking at interest rates differently
Until recently, the dominant market thesis was that 2026 would be a year of gradual easing of monetary policy in many developed economies. Falling inflation, weaker growth and more moderate wages were opening space for lower interest rates and easier borrowing. Now that calculation is not being completely cancelled, but it is becoming conditional. The question is no longer only when central banks will cut interest rates, but under which energy and geopolitical assumptions they can do so without the risk of reigniting inflation.
The ECB has already indicated that increased geopolitical tensions create risks for both growth and inflation, while the Fed stresses that it is also monitoring international factors when assessing future moves. Such a tone means that the next several weeks and months will be crucial for market expectations. If it turns out that the energy blow is short and that supply routes are stabilising, the market could return to the thesis of gradual easing. If, however, the shock is prolonged, fuel and transport prices could become an argument for more cautious or delayed rate cuts.
Not all inflation is the same, but energy still has political power
It is important to distinguish total inflation from core inflation, because central banks build a large part of their decisions precisely on that difference. Energy can be extremely volatile and in itself does not necessarily mean a long-term inflation problem. However, the political and social weight of fuel prices is much greater than the statistical component itself in the consumer price index. When citizens see a price increase at petrol stations and on transport bills, the perception of inflation rises faster than economic models, and that changes both consumer behaviour and political pressure on governments and monetary authorities.
That is why the return of oil to the centre of the story cannot be reduced to a technical discussion about base effects. It is a question of how much the global economy has truly emerged from a period of extraordinary sensitivity to energy disruptions. Data from Europe and the United States had shown that the process of price stabilisation had entered a more serious phase, but the latest geopolitical shock reminds us that disinflation is not a linear path. One serious disruption on a key energy route is enough for market assessments of interest rates, consumption and growth to change in a very short time.
At the moment, according to the available official projections and market signals, the most accurate thing to say is that the world is not automatically entering a new prolonged inflationary wave, but that the risk of its return has increased noticeably. The price of Brent has already reacted strongly, OPEC+ is trying to maintain a message of stability, and central banks are once again weighing how solid the progress so far in bringing inflation down really is. For households and businesses, this means that a period of more predictable price declines is not yet guaranteed. For markets, it means that a geopolitical event is once again setting the economic agenda. And for policymakers, it means that the next moves will depend less on the desire for lower interest rates, and more on whether the energy shock will quickly dissipate or grow into a new, broader phase of inflationary pressure.
Sources:- U.S. Energy Information Administration – March short-term energy outlook with data on Brent’s jump, the Strait of Hormuz and the price projection (link)- OPEC – statement of March 1, 2026 on the production adjustment of eight OPEC+ members and the retention of flexibility for market intervention (link)- European Central Bank – monetary statement of March 6, 2026 with inflation estimates and a warning about geopolitical risks for energy, growth and prices (link)- Eurostat – official data on inflation in the euro area for January 2026 and the contribution of energy to the overall inflation rate (link)- U.S. Bureau of Labor Statistics – release on the U.S. CPI for January 2026 and the schedule for the release of new data (link)- Federal Reserve – statement after the FOMC meeting of January 28, 2026 on keeping interest rates unchanged and elevated uncertainty in the outlook (link)- International Monetary Fund – updated world economic projections from January 2026 with a warning about geopolitical risks (link)
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