Hormuz Closure Sparks Core Inflation Risks in Euro Area

The closure of the Strait of Hormuz has raised concerns about renewed inflationary pressures in the euro area. A policy brief from oenb.at used a Quantile Regression Forest (QRF) model to assess the implications for core inflation risks.

According to the analysis, upside risks to core inflation increased sharply following the outbreak of the war, reaching their highest levels in April and May 2026. The increase was driven mainly by firms' short-term selling price expectations.

The Quantile Regression Forest model captured upside and downside risks and helped assess the effects of rare events that conventional forecasts may overlook. Decomposing the model's results showed that firms' short-term selling price expectations accounted for most of the increase in upside risks.