Hormuz reopening may not reverse economic damage already done, analysts say
14 reported
The U.S. and Iran signed a memorandum Thursday to reopen the Strait of Hormuz, ending a nearly four-month war that disrupted global energy supplies, but analysts warn that the economic toll from higher inflation and supply chain disruptions will take months to unwind. Oil prices have fallen to around $80 a barrel from a March peak of $118, and Goldman Sachs cut its oil price forecast, projecting Brent to average $80 in late 2026 and $75 in 2027. However, Simon MacAdam of Capital Economics said higher energy and fertilizer prices have already been "baked in" across many economies, with natural gas prices typically lagging the upstream market by about three months. The World Bank lowered its global growth forecast to 2.5% and expects inflation to climb to 4% this year, up from 3.3% in 2025, even if oil flows ease. Central banks, including the European Central Bank, the Federal Reserve, and the Bank of England, have responded with rate decisions that reflect the altered economic calculus from the crisis. The crisis has also prompted governments to reconsider energy security strategies, with officials calling for larger energy stockpiles and alternative supply routes.
What’s reported
The U.S. and Iran signed a memorandum Thursday to open the Strait of Hormuz, ending a nearly four-month war.
Oil prices fell to around $80 a barrel on Friday, down from a peak of $118 in March.
Goldman Sachs cut its oil price forecast, projecting Brent to average $80 in late 2026 and $75 in 2027.
Simon MacAdam, deputy chief global economist at Capital Economics, said higher energy and fertilizer prices have already been "baked in" across many economies.
MacAdam noted natural gas prices piped to households typically lag the upstream market by around three months.
The World Bank lowered its global growth forecast to 2.5%, the slowest since the pandemic, and expects global inflation to climb to 4% this year from 3.3% in 2025.
The World Bank said fertilizer prices could jump as much as 38% this year due to supply disruptions.
The European Central Bank raised interest rates last week, its first tightening move in nearly three years.
The Federal Reserve, under Chairman Kevin Warsh, left short-term interest rates unchanged but raised its inflation forecast to 3.6% by December from 2.7% projected in March.
Nine of 18 Fed voting members expect at least one rate hike before the end of this year.
The Bank of England kept policy rates unchanged but warned of logistical delays in restoring energy production and transportation even with prompt conflict resolution.
Alex Holmes of Economist Intelligence Unit said central banks with a hawkish stance are unlikely to reverse course quickly.
A super El Niño threatens agricultural output in the coming months, adding pressure to food inflation.
Matteo Lanzafame of the Asian Development Bank said ensuring a buffer in peaceful times would provide a cushion against global contingencies.
Key figures
Simon MacAdam, deputy chief global economist at Capital Economics
Kevin Warsh, Chairman of the Federal Reserve
Alex Holmes, regional director at Economist Intelligence Unit
Matteo Lanzafame, director at the Asian Development Bank
Sources: CNBC
