#OilPricesRise

The stagflation scenario, a direct consequence of the oil supply shock created by the conflict, is becoming one of the most serious risk scenarios for the global economy, simultaneously triggering high inflation, stagnant growth, and rising unemployment. The de facto closure of the Strait of Hormuz, resulting in a loss of twenty million barrels of oil per day, has fixed Brent crude oil prices at $19 per barrel, increasing energy costs by more than thirty percent. This fuels cost inflation in production chains while simultaneously suppressing consumer demand. According to International Monetary Fund models, this shock reduces global gross domestic product growth by 0.5 to 1 percentage point, while pushing headline inflation up by 40 to 60 basis points. Particularly in developing countries, the classic signs of stagflation—sticky prices, slowing industrial production, and rising unemployment rates—are observed.

In advanced economies, institutions like the Federal Reserve and the European Central Bank are forced to keep interest rates high to combat inflation, but this policy further slows growth and deepens the stagflation trap because a 15 to 25 percent jump in logistics and food costs for energy importers shrinks consumer spending, erodes corporate profit margins, and delays investments due to uncertainty. In emerging markets, in energy-dependent economies like Turkey, the depreciation of the Turkish lira amplifies import inflation, and maintaining the policy interest rate at 50 percent slows growth, while the current account deficit and depletion of foreign exchange reserves further exacerbate the risk of stagflation. In major importers like China and India, supply chain disruptions drag down industrial production indices, and rising food prices threaten social stability.

In the long term, if a stagflation scenario materializes, global trade volume will shrink, borrowing costs will rise, and a cycle of low productivity lasting for decades, similar to the oil crises of the 1970s, could occur. This dynamic leaves central banks in a dilemma regarding classical monetary policy tools, as it seems impossible to simultaneously implement both tight and loose policies to both reduce inflation and support growth. Consequently, the severity and duration of stagflation depend on the diplomatic de-escalation of the conflict, because only when supply returns to normal can both inflationary pressure and growth loss be brought under control.
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