【Iran Crisis】Invesco: Oil prices rising by $50 per barrel could increase global inflation by 1 percentage point

The conflict between the United States and Iran has driven international oil prices sharply higher. Brent crude oil futures briefly approached $120 per barrel before falling back. Invesco Global Research Director Benjamin Jones analyzed that a $50 increase in oil prices could raise the global inflation rate by about 1 percentage point this year.

However, Jones also believes that while inflation could rise significantly, it is unlikely to cause a catastrophic impact. If the conflict is resolved relatively quickly, inflationary pressures should ease; although the risk of stagflation increases, it is not expected to reach the double-digit inflation seen in 2022.

Jones explained that the trend in energy prices indicates the crisis may be temporary. Recently, Brent crude oil futures surged past $90 per barrel, but the gains in long-term contracts are relatively limited, reflecting market expectations that supply disruptions are temporary.

Invesco: Central Banks Will Overlook Short-Term Supply Shocks — Expect Bank of England to Continue Cutting Rates, ECB to Hold Steady

Market focus is on how energy shocks will influence central bank interest rate decisions. Jones expects that central banks will overlook short-term supply shocks, but concerns over inflation expectations could influence their decisions. He also noted that market expectations for central bank policies are somewhat optimistic.

Due to the surge in oil prices, the market currently expects the Bank of England to keep rates unchanged, while the European Central Bank is expected to raise rates in 2026. Jones believes these expectations are unlikely to materialize and anticipates the Bank of England will cut rates this year, while the ECB will keep rates steady.

Jones believes the U.S. economy has essentially achieved energy self-sufficiency, no longer relying heavily on imported oil and natural gas, unlike Europe and Asia. Emerging markets and European stock markets are more affected because of their higher dependence on energy imports. He added that energy price shocks weaken consumers’ discretionary spending, potentially slowing economic growth, especially in energy-dependent regions like Europe and the UK.

The baseline scenario for the firm is that the US-Iran conflict will last several weeks, with limited long-term economic impact. However, if supply disruptions extend, serious chain reactions could occur.

Market Opening: Long and Short Positions

“High oil prices” + “Weak employment” — dual pressures. Will oil and stock markets diverge? Is the new “14th Five-Year Plan” creating investment opportunities?