Global Markets Stagflation Fears Skyrocket Amid Oil Price Surge

Investors are bracing for a potential return to stagflation, reminiscent of the 1970s, as war in the Middle East sends global energy prices soaring. The risk of a 1970s scenario is rising, according to Kaspar Hense, portfolio manager at RBC BlueBay Asset Management.

The surge in oil prices has reached $100 per barrel, with Brent crude up 70% since the start of the year. European wholesale gas prices have also hit their highest level in over three years, fueling inflation concerns and potentially dampening economic growth.

Central banks are facing a dilemma as they try to balance inflation control with the risk of further undermining economic growth. Markets now see at least one European Central Bank hike this year, compared to a 40% chance of a cut before the war.