Energy Shock: Iran Conflict Triggers Oil Price Spike Amid Economic Uncertainty

The world is bracing for an energy shock similar to the one in 2022, triggered by the war in Ukraine. This time, however, the surge in oil and gas prices may be less severe due to slower demand growth and improved supply chains. According to a new dashboard from Etudes Economiques, BNP Paribas, the current energy shock is expected to have a more moderate impact on inflation compared to 2022.

The conflict between the United States and Iran has raised tensions in the region, leading to an increase in hydrocarbon prices. However, since mid-June, when a Memorandum of Understanding (MoU) was signed, the risk of a severe escalation of the conflict had eased. Nevertheless, hostilities resumed in mid-July, sending oil prices up again.

The current energy shock appears to be having a limited impact on economic activity, with confidence surveys showing a positive trend in the Eurozone. This is attributed to a better performance of the business climate in the manufacturing sector, which has been less affected by the conflict compared to 2022.