Analysts Say Hormuz Opening Won't Quickly Reverse Economic Impact of War
Even as the Strait of Hormuz reopens and oil prices fall, economists warn that higher inflation and supply chain disruptions will linger for months.
The United States and Iran signed a memorandum on Thursday to reopen the Strait of Hormuz, ending a four-month conflict that disrupted global energy supplies. While oil prices slipped to about $80 a barrel after peaking at $118 in March, analysts say the economic fallout will persist.
Simon MacAdam, deputy chief global economist at Capital Economics, noted that much of the inflation caused by higher energy and fertilizer costs is already reflected in many economies and that it could take several months for these price increases to filter through food supply chains to consumers. He added that natural-gas prices to households typically lag upstream market movements by roughly three months.
Goldman Sachs recently lowered its oil price outlook, projecting Brent to average $80 per barrel in late 2026 and $75 in 2027, citing a quicker recovery in Persian Gulf crude flows. However, a backlog of vessels awaiting transit through the strait may delay a full normalization of freight traffic.
The World Bank, which recently cut its global growth forecast to 2.5%, expects global inflation to rise to 4% this year, up from 3.3% in 2025, even if oil-flow disruptions ease. It also warned that fertilizer prices could climb as much as 38% due to supply shortages from the Gulf.
Europe faces added pressure from historically low natural-gas storage levels. MacAdam anticipates inflation in Europe and Japan could increase by another 3 to 4 percentage points as U.S. liquefied natural-gas export prices rise.
Central banks are adjusting policy in response. The European Central Bank was the first major central bank to raise interest rates in nearly three years. The U.S. Federal Reserve kept short-term rates unchanged but lifted its forecast for personal consumption expenditures inflation to 3.6% by December, with half of its voting members expecting at least one rate hike before year-end. The Bank of England also left rates steady, cautioning that even a swift resolution of the conflict could face logistical delays in restoring energy production and transportation.
