- Key policy question for central banks is not the peak in Brent, but whether higher de-livered energy costs — via gas, freight, insurance and physical disruption — persist long enough to entrench inflation
- Our baseline is a negotiated reopening with persistent friction: crude may retrace, but slow normalisation in flows should keep gas and freight costs sticky and inflation above target for longer
- The shock transmits through three channels — direct energy effects, indirect pass-through and second-round effects — with the first fully open, the second building and the third not yet apparent
- ECB is the most constrained: high energy exposure and a heightened concern for its credibility after the 2021–22 inflation overshoot leave it least able to look through the shock, even as fragmentation risks complicate how far tightening can go
- Fed has the most room to look through the shock as the US is less exposed to Hor-muz, but tariffs complicate things by adding a second supply-side inflation impulse
- BoE sits between the two: the Q3 regulatory energy price reset creates a mechanical inflation step-up, while sticky services inflation leaves the UK more exposed to sec-ond-round risks than the euro area or the US
Hormuz Shock: War, Inflation and the Central Banks’ Dilemma
Global & Regional Focus Notes
05 June 2026
See also
