Global oil prices near $80 a barrel following the war in Iran are likely to push up inflation and weigh modestly on global growth, though the broader outlook for monetary policy may remain largely unchanged unless energy costs rise more sharply.
Applying standard economic estimates to the latest commodities forecasts suggests the increase in oil prices could add about 0.2 percentage points to global inflation while reducing global growth by roughly 0.1 percentage point. The impact on core inflation, which excludes volatile food and energy prices, is expected to remain limited at less than 0.1 percentage point.
Oil prices have risen about 14% since late February to around $80 per barrel as markets factor in disruption risks in the Middle East. Analysts estimate current prices reflect expectations that the Strait of Hormuz — a key route for global oil shipments — could remain fully closed for another five to six weeks, with some supplies rerouted through pipelines.
The outlook could deteriorate if the disruption proves more severe. If oil prices were to rise temporarily to $100 per barrel, global headline inflation could increase by around 0.7 percentage points, while global economic growth could slow by about 0.4 percentage points.
Financial conditions have also tightened in response to the conflict, adding further downside risks to growth. Global financial conditions have tightened by about 31 basis points since last Friday, reflecting rising uncertainty and higher risk premiums in financial markets.
There are also potential upside risks to inflation. Supply disruptions in liquefied natural gas markets and heightened sensitivity of inflation expectations could amplify the impact of higher energy costs.
Historically, central banks have tended not to react strongly to oil price shocks alone. However, when inflation is already elevated or energy shocks are particularly large, policymakers have responded with modest monetary tightening.
Current projections suggest global central banks are unlikely to significantly alter their policy paths under the baseline scenario. But if oil prices surge to $100 per barrel or pass-through to consumer prices intensifies, policymakers — particularly in emerging markets — could delay planned interest rate cuts.
