Name: On the Iran War from an Energy and Inflation Perspective | CME Group's Market Signals
Uploaded: 2026-03-13T20:07:00Z
Duration: 5 min 37 s
Description: Join us as we discuss the cascading effect of the war in the Middle East and its impact on energy prices and inflation.

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Join us as we discuss the cascading effect of the war in the Middle East and its impact on energy prices and inflation.

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On the Iran War from an Energy and Inflation Perspective | CME Group's Market Signals

Thank you and welcome Erik.

Well, thank you so much for having me back.

Erik, when we last spoke two weeks ago, there was no war in the Middle East, and now there is. Our thoughts are with the people in the region, but from your perspective as chief economists analyzing the impact of geopolitical events on markets, how are markets pricing in this conflict?

Well, what we've seen in terms of the most dramatic pricing is in the energy markets. First of all, crude oil prices are very, very significantly higher, especially contracts for delivery in months like April, May, and June. Even more so, we're seeing a big reaction from refined products, including gasoline, but above all from diesel fuel or what's in the United States, often referred to as heating oil in the markets. These prices have increased very, very sharply because a lot of the refining goes on in the Middle East. And then on top of that, we're also seeing a big move in Eurasian prices for natural gas.

So you previous said that US light crude is highly mobile. Given current circumstances in the Strait of Hormuz and elsewhere in the Gulf, can US shell offset the loss of Iranian and Persian Gulf supplies? Or are we facing a structural deficit that overrides typical supply demand fundamentals?

So, if the Strait of Hormuz remains blocked or interrupted, it is not possible for US or even US and Canadian production to gather to offset that. Around 20% of global supply transits through the Strait of Hormuz. The United States produces around 13.9 million barrels per day. If you add in Canadian production, that comes to maybe like 17 or 18 million barrels per day. That's 17 or 18% of the global total. But most of that is used domestically in North America. So there's not really much of a surplus to export to the rest of the world in the event that there are problems elsewhere.

So Erik, as you know, and we've talked about this in previous episodes, markets were already jumpy before this. Where are the safe havens right now?

Well, you know, that's a really good question, and it's not an easy question to answer. Normally, you might say one of the safe havens should be US treasuries. The US Treasury yields during this first week of March of consistently risen throughout the week, even on Friday when we had this very, very weak employment report that normally should have driven yields down. So treasuries have not delivered as a safe haven, as one might expect. One thing that is behaving a bit like a safe haven, however, is gold. Gold prices have been choppy since this war began, but they have not consistently fallen. So gold does seem to be retaining its value better than some of the other alternatives.

You know, Erik, the US economy has shown remarkable resilience through a number of recent negative supply shocks, like the tariffs. And now this war, the US inflation picture is currently at a critical pivot point. Is the long-term downward trend now being challenged by a sudden spike in energy costs?

Yes, well I think that that downward trend was most evident in CPI or this Consumer Price Index, which is the most widely followed by the news media and the public. But if you look at the one that the Federal Reserve itself follows, the PCE, that one was already starting in uptrend, especially the core PCE, excluding food and energy, which is a much broader measure of inflation that was already trending upwards even before the war began. Now, if gasoline and diesel prices remain where they are, as of early March, throughout the months of March and April, we could very easily be looking at a further 1% or more rise in headline inflation as a result of that. So I think inflation could trend upwards very sharply in the short term, unless this conflict comes to a very quick end.

No, that's in the US, but how bad is the inflationary picture for the rest of the global economy?

Well, going into this conflict, it was a very similar picture to the US. The great majority of countries are running inflation rates about 1% above their central bank targets. However, Europe and Asia could be hit much harder by rising energy prices in the United States. So in the United States, we're seeing higher prices for diesel fuel, also for gasoline. The same thing is true across Europe and Asia, but there's one difference. In the United States, natural gas prices remain very, very low. That is not true across Europe and Asia, where natural gas prices and then by extension, electrical generation prices could take a big jump, especially if Qatar is unable to restart its liquified natural gas export center and start getting that gas out through the Strait of Hormuz.

Well Erik, we will have to leave it here and we'll see how the war progresses in the coming weeks. Thank you very much. Your insights and clarity in these uncertain times are always appreciated.

Thank you for having me.