Oil: Conflict-driven gains fuel inflation risks – Danske Bank

Danske Research Team underlines that the US–Iran conflict and closure risks in the Strait of Hormuz are heavily impacting energy markets. US gasoline prices have surged nearly 50% since hostilities began, and higher Oil prices are pressuring global bond yields and inflation expectations. The bank warns that ongoing regional instability continues to disrupt energy markets and raise inflation risks.

Hormuz tensions drive energy repricing

"In US-Iran conflict, Donald Trump announced "Project Freedom," a plan to guide ships through the Strait of Hormuz from Monday, though Iran strongly criticised the move as a violation of the ceasefire. Iranian officials dismissed US claims of positive discussions."

"Energy markets remain heavily impacted, with US gas prices rising to an average of USD 4.45 per gallon on Sunday, a nearly 50% increase since the conflict began, according to AAA data."

"Meanwhile, Israeli evacuation orders in southern Lebanon underscored growing regional instability. Despite a temporary pause in US-Israeli bombing, the conflict continues to disrupt energy markets, fuelling inflation risks."

"The focus remains on the war between Iran and US and the closure of the Strait of Hormuz. The continued uncertainty surrounding the war and the rise in the oil price is putting pressure on global bond yields and interest rates."

"Yes, there is still potential downside risk from Iran and the conflict in the Middle East, but there is also potential upside risk in equities from the strong earnings momentum."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)