The Real Price Of Oil Is Not What You Think
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The ongoing U.S.-Iran conflict has caused a significant disparity between physical and paper oil prices, signaling acute supply stress. The closure of the Strait of Hormuz has driven a $17 premium in physical oil, potentially leading to higher inflation and stagflation risks.
The U.S.-Iran conflict is escalating, with a ceasefire set to expire in less than 48 hours. Physical oil prices have surged to $112/barrel, $17 higher than paper oil, due to the closure of the Strait of Hormuz. This has caused an unprecedented breakdown in the global energy supply chain. Elevated energy costs are translating into higher inflation, with Eurozone annual inflation jumping to 2.6% in March. If the Strait remains closed, stagflation risks rise, and markets may be underestimating the duration and impact of the energy supply shock. The conflict's impact on oil prices and inflation is significant, and the situation remains volatile.
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