Oil Shock Is Adding Stress to the Global Economy

Oil markets have been pitched into turmoil by the war in Iran, and the effects will likely be long lasting and far reaching.

After a meeting on Sunday, OPEC+ warned that the damage to Middle East energy assets will have a prolonged impact on oil supply even after the conflict ends. And with US inflation data coming out later this week, the sudden increase in gasoline prices felt by American consumers is set to be on full display.

Economists are penciling in a 1% increase in the consumer price index for March — the sharpest one-month advance since 2022 — after the Iran war pushed gas prices at the pump up by about $1 per gallon.

As the war grinds on, there are signs of acute concern about near-term supply. Brent’s prompt spread — the difference between its two nearest contracts — ballooned above $10 a barrel in backwardation, a bullish pattern. That’s the widest since the conflict began, and tops peaks in 2022 after Russia invaded Ukraine.