Optimism for a resolution to the conflict
and the reopening of the Strait of Hormuz was checked after the United States said
it had carried out strikes on missile launch sites in Iran.
·
Oil
prices rebounded on 26 May 2026 after the United States carried out strikes on
missile launch sites in Iran, raising concerns over prospects for a peace
agreement.
·
The
development increased fears of a broader regional conflict involving Iran,
Israel, and Hezbollah.
·
Iran
stated that any peace agreement must address:
o Its conflict with the United States and
Israel
o The fighting between Israel and Hezbollah
in Lebanon
·
The
expanded conditions have complicated efforts to achieve a long-term settlement.
·
Brent
crude, the global oil benchmark, rose about 3% to nearly $96 per barrel.
·
Investors
remain focused on disruptions in the Strait of Hormuz, a critical oil and gas
shipping route between Iran and Oman.
·
The
Strait normally carries around one-fifth of global oil supply, making any
disruption a major risk to energy markets.
·
Futures
linked to the S&P 500 indicated a modest rise ahead of U.S. market opening.
·
Asian
markets showed mixed performance:
o Japan and mainland China markets declined
o South Korea’s KOSPI gained around 3%
·
European
markets remained subdued:
o The Stoxx 600 index fell slightly
o Britain’s FTSE 100 rose about 1%
·
Average
gasoline prices fell slightly by 1 cent to $4.50 per gallon.
·
Despite
the small decline, gasoline prices remain 51% higher since the war began.
·
Analysts
noted that retail fuel prices usually lag behind movements in crude oil prices.
·
Diesel
prices declined 2 cents to $5.58 per gallon.
·
Diesel
prices are still up 48% since the start of the conflict.
·
Analysts
at Oxford Economics warned that the oil price shock may have “longer-lasting
second-round effects” on inflation.
·
They
stated that:
o Higher inflation in 2026 appears
“inevitable”
o Inflation risks for 2027 and beyond are
“skewed to the upside”
·
Normally,
higher prices reduce consumer demand and slow inflation over time.
·
However,
economists argue this effect may now be weaker because governments increasingly
protect consumers through:
o Subsidies
o Fiscal support measures
o Automatic stabilizers
·
This
creates tension between:
o Central banks seeking slower growth to
control inflation
o Governments trying to shield households
from rising costs
·
Persistent
high oil prices could:
o Keep global inflation elevated
o Increase transportation and manufacturing
costs
o Slow economic growth
o Complicate monetary policy decisions for
central banks worldwide
·
Continued
instability in the Strait of Hormuz remains one of the biggest risks for global
energy markets and inflation outlook.
Oil
prices climbed on Tuesday (26.05.2026), recovering some of the previous day’s losses,
after the United States said it had carried out strikes on missile launch sites
in Iran, casting doubt on the prospects of a peace deal.
The
strike followed signals from Israel that it planned to intensify its campaign against
the Iranian-backed militant group Hezbollah in Lebanon. Iran has said any agreement
would need to address both its war with the United States and Israel, as well as
the fighting between Israel and Hezbollah, complicating efforts to reach a lasting
resolution.
Oil prices move higher.
·
The
price of Brent crude, the global benchmark for oil, rose 3 percent to about $96
a barrel.
·
Investors
and analysts are focused on the continued disruption to shipping in the Strait of
Hormuz, the narrow waterway between Iran and Oman that is a vital trading route
for oil and natural gas that normally carries as much as one-fifth of the world’s
oil supply.
U.S. stocks set to rise at
open
·
Futures
on the S&P 500 pointed to a slight increase when stocks resume trading in the
United States on Tuesday.
·
Stocks
in Asia, where countries import vast quantities of oil and gas, were mixed. Stock
markets in Japan and mainland China were down, while South Korea’s benchmark KOSPI
rose about 3 percent.
·
In Europe,
stocks were subdued. The Stoxx 600, a broad index that tracks the region’s largest
companies, fell less than 1 percent, while the FTSE 100 in Britain was up about
1 percent.
Gas prices tick lower.
·
Gas
prices edged down 1 cent on Tuesday to a national average of $4.50 a gallon, according
to the AAA motor club. The cost for drivers has increased 51 percent since the war
began.
·
Gas
prices don’t move in lock step with crude, usually trailing increases or drops by
a few days.
·
The
average price of diesel fell 2 cents to $5.58, on Tuesday up 48 percent since the
start of the war.
What they are saying: Inflation
risks are ‘skewed to the upside’
·
Analysts
at Oxford Economics revisited their forecasts for the next few years and concluded
that “the oil price shock might have longer-lasting second-round effects on inflation.”
Higher inflation this year is “inevitable,” they wrote, and the risks that price
increases will remain elevated in 2027 and beyond are “skewed to the upside.”
·
Higher
prices generally result in lower demand as consumers cut back on purchases, which
dents economic growth and brings inflation back down, but this effect has become
“more limited than policymakers, especially central banks, tend to believe,” they
added. This is a result of the “inherent tension” between central banks and governments,
they said: “Central banks want a gradual slowdown in activity to anchor inflation,
but governments tend to shield consumers through subsidies and automatic stabilizers.”