Iran/Israel war (6+ weeks)/Hormuz: oil $108-140+ backwardation fears $200 stagfl/hawk but de-escal/IMF caps inf
Key Questions
How has the Iran/Israel war impacted oil prices?
Oil has surged over 70% to $108+, with Brent at $103+ and fears of $140+ or even $200 in backwardation. Gas prices hit $4.12. The war, now over 6 weeks, affects Hormuz Strait supply.
What are the expected effects on upcoming CPI data?
CPI preview shows headline +0.9% m/m with energy +10.6%, pushing annual headline to 3.1-3.5%. Core CPI forecast at 2.66%. This reflects first snapshot post-Iran war.
What stagflation risks are highlighted?
Stagflation fears include unemployment at 4.3% and GDP growth at 1%. Oil shocks could exacerbate this. Hammack and Goolsbee see possible hikes.
How is the Fed responding to energy shocks?
Powell views energy inflation as transient. Fed caution puts cuts off the table. Officials like Hammack note hikes possible if inflation persists.
What is Mexico's inflation situation amid global shocks?
Mexico's inflation at 4.02% with Banxico holding at 6.75%. This mirrors global pressures from oil. Brent surge contributes to regional concerns.
Why might central banks 'look through' supply shocks?
Central banks like the Fed often view oil shocks as temporary, avoiding rate hikes to prevent stagflation. Powell explained this at Harvard. IMF caps inflation impacts from de-escalation scenarios.
What do Fed officials Goolsbee and Hammack say about inflation?
Goolsbee and Hammack describe inflation as 'flashing orange' or worse due to energy shocks. They signal potential hikes. This aligns with war-driven pressures.
How long are the lags from the war on economic data?
War effects lag 6-8 weeks, now in week 6+. CPI Friday captures initial impacts. De-escalation could cap inflation per IMF.
CPI Mar preview 0.9% MoM gas+$1/gal ann3.3% Hormuz choke Iran oil shock; oil +70% $108+ gas $4.12+36% Brent$103+; stagfl unemp4.3%/GDP1%; Hammack/Goolsbee hikes poss; lag6-8wks; Fed caution cuts off table.