Rudi’s View: Oil, Inflation, Growth & Stagflation

Rudi's View | Mar 18 2026

2026 is not a repeat of the 1970s, but the longer global oil supply remains interrupted, the more financial markets will start focusing on its impact on global growth.

By Rudi Filapek-Vandyck, Editor

Oil, Inflation, Growth & Stagflation

Whether we like it or otherwise, but financial markets are being held hostage by the Strait of Hormuz and the related spike in prices for oil and gas.

The uncertainty about what comes next and how quickly, or not, the global energy supply bottleneck might be resolved is keeping a firm lid on equity markets, with Australia's major indices now down thus far for calendar year 2026.

All in all, and to the surprise of more bearish inclined market observers, the global response on markets has remained relatively muted.

No doubt, this reflects a general view the US administration is not prepared to risk the mid-term election later in the year over this ill-thought out full-frontal attack on the Iranian regime.

But a quick resolution is, of course, by no means guaranteed. A staunchly defiant new Iranian head of state is testament to that statement.

How Much Damage?

Even if this war will be over within the next number of weeks, as suggested by the US administration, today's relative calm on equity markets might well severely underestimate the damage to supply and the world economy that is in place by then.

A recent assessment by analysts at UBS put it as follows:

• The Strait of Hormuz remains closed to the end of March (two more weeks); this might see oil priced at US$120/bbl

• Under a scenario whereby there's no let up until late April, oil could well be priced above US$150/bbl

For good measure, there is but a valid argument to be made US president Trump is already laying the foundations for a signature TACO move, whereby he declares 'mission accomplished' and ceases further hostilities, but maybe things aren't that easy and straightforward anymore?

Last week's oil markets assessment by ANZ Bank yet again emphasised the risk for much larger damage to supply is rising and not reflected in today's markets, be they fixed interest, commodities, energy or equities, and the clock is ticking.

By late March, ANZ analysis suggests, well shut-ins will start emerging on the back of interrupted access to electricity, water and gas, not to mention the risks for staff employed throughout the region.

Once wells are shut-in, bringing them back online is neither immediate nor guaranteed.

So the risk is real that what are at face value temporary disruptions can quickly turn into longer-lasting supply losses, even if the war ends or security conditions stabilise.

The release of emergency inventories, as already announced by the International Energy Agency (IEA) and locally the Australian government, will have a tempering impact, but it doesn't solve the underlying problem.

And thus energy prices will then remain higher-for-longer.

The longer the disruption persists, the higher the price will rise to restore the market's balance, ANZ predicts.

The key message from that assessment is higher oil prices are no longer solely the result of rather extreme outcomes, such as an extended closure of the Strait of Hormuz.

ANZ Bank has now made US$100/bbl its base case scenario for Q2, with the additional warning investors should not be complacent about ongoing risk to the upside.