HSBC has sharply increased its 2026 oil price forecast as the US-Iran conflict chokes a vital global artery for energy, warning that the resulting inflation shock will force more central banks to raise interest rates even if a ceasefire is reached.
"Every farm, every factory, every family is paying the price, and the ones who are most vulnerable end up carrying the heaviest load," Sultan Al Jaber, CEO of the United Arab Emirates' state oil firm ADNOC, said at an Atlantic Council event, highlighting the widespread impact of the supply disruption.
The conflict, which escalated on February 28, has led to a near-closure of the Strait of Hormuz, a chokepoint for about a fifth of the world's oil supply. The disruption sent Brent crude prices spiking above $126 per barrel and they have remained over $100 since. The fallout has driven fuel prices up 30 percent, fertilizer costs up 50 percent, and airfares a quarter higher, according to Jaber. The inflationary pass-through has been severe in Asia, contributing 3.9 percentage points to Thailand's CPI between February and April.
With the damage to global supply chains done, central banks are shifting their focus from protecting growth to fighting inflation. HSBC now expects the European Central Bank and Bank of England to hike rates in the June-July window, with central banks in the Philippines, India, and Indonesia to follow in the second half of the year. The US Federal Reserve, while holding its policy rate at 3.5%-3.75%, has revised its year-end inflation projection upward to 2.7 percent from 2.4 percent.
No Quick Fix for Oil Flows
The core of the problem is the physical blockade of the strait. Even if the conflict ended immediately, a return to normal is distant. Al Jaber's outlook is among the most pessimistic from industry leaders, projecting that full flows will not return before the first or even second quarter of 2027. This extends a warning from the CEO of Saudi Aramco, who cautioned the market may not recover until 2027 if the situation persists.
HSBC's report notes that the risk extends far beyond crude oil, with shortages looming for refined products like jet fuel and diesel, as well as fertilizers, plastics, and aluminum. The bank's analysts argue that with every day the strait remains closed, the range of affected commodities expands, forcing businesses to pass on rising costs. This dynamic is unfolding even as US equity markets touch new highs, a stark contrast to the sell-off in bond markets, which are pricing in a higher-for-longer rate environment.
This article is for informational purposes only and does not constitute investment advice.
