This page has been updated with additional analysis since first publication. All of our coverage of the macro and market implications of the Middle East conflict can be found here . Fiscal position worse than expected even before energy price shock is …
20th March 2026
All of our coverage on the Middle East conflict can be found here , but we have highlighted some key pieces below. Gasoline prices jumped to a record high of ¥ 190/liter at the beginning of the week but the government’s decision to cap them at ¥ …
China’s relative equity and bond market resilience could continue even if the war drags on, although the outlook for the renminbi is less clear. China’s financial markets have been some of the better performers over the war so far, especially among net …
All of our coverage on the Middle East conflict can be found here , but we have highlighted some key pieces below. Higher-for-longer risks are front and centre The Reserve Bank of Australia was the only G10 central bank to raise interest rates this week. …
All of our coverage on the Middle East conflict can be found here , but we have highlighted some key pieces below. The conflict in the Middle East has escalated further over the past week, especially in the last 24 hours. More key members of Iran’s …
19th March 2026
While the conflict in the Middle East could evolve in myriad ways, we think government bonds would typically recover in our ‘baseline’ scenario but struggle in our ‘adverse’ one. That largely reflects what we think would happen to monetary policy. We …
Before ECB policymakers react to the rise in energy prices, they will wait for more clarity on the size and duration of the shock. There would be no need for a response if energy prices dropped back towards pre-war levels fairly soon, but this looks …
The Iran conflict has increased uncertainty and pushed up interest rates, both of which will weigh on investment activity over the next few months. But, assuming the impact of the conflict is short-lived, upward pressure on property yields will be …
Sharp fall in new home sales a weather-related blip The large drop in new home sales in January reflects the impact of extreme cold weather across much of the country, and is likely to have reversed last month. Moreover, newbuild sales are less vulnerable …
While leaving interest rates at 3.75% today as widely expected, the Bank of England suggested it is more concerned about the upsides to inflation from the leap in energy prices triggered by the conflict in the Middle East than the downsides to activity. …
Chance of ECB hiking in April is rising The ECB’s press release and updated forecasts suggest that policymakers think that the inflationary effects of higher energy prices will outweigh the disinflationary effects of weaker economic growth. While they are …
Sustained high oil prices would stall the nascent manufacturing recovery by weighing on global demand. The data centre buildout would likely go on unaffected, however, sustaining strong demand for hi-tech manufactured goods, with an increasing share met …
BoE ready to react, and seems a bit more concerned about inflation than activity While leaving interest rates at 3.75% today as widely expected, the Bank of England played the current uncertain outlook for energy prices with a fairly straight bat by not …
The comparative affordability of renting versus owner-occupation is one factor that we expect to support rental demand across most European markets in the coming years, especially in the German markets and Vienna where the cost gap is highest. In our UK …
SNB leaves rates unchanged, stresses uncertainty The SNB left its policy rate unchanged at zero today and nudged up its inflation forecast trivially. Otherwise, its commentary underlines the Bank’s willingness to intervene to limit upward pressure on the …
CBC to stay on the sidelines Taiwan’s central bank (CBC) left its main policy rate on hold today (at 2.00%) and, with growth likely to hold up well in the face of the conflict in the Middle East and the government limiting the pass through from higher …
This page has been updated with additional analysis since first publication. Jobs growth stabilising, but labour market still weak before stagflation shock While there were some green shoots of a recovery in payroll employment in February, today’s data …
A slim majority of BoJ Board members believe that the conflict in the Middle East will on balance strengthen inflationary pressures in Japan. Accordingly, we’re sticking to our forecast that the Bank will deliver another 25bp rate hike at its April …
Bank of Japan will hike again in April The Bank of Japan gave little away when it decided to keep interest rates unchanged today but we still think it will hike rates again at its next meeting in April. The Bank’s decision to keep its policy rate at 0.75% …
Renewed rise in unemployment won’t prevent further rate hikes With inflation set to approach 5%, the renewed rise in the unemployment in February won’t prevent the RBA from hiking rates further. The 48,900 rise in employment in February meant that …
New Zealand’s recovery struggling even before the Iran conflict With the economy still operating with substantial excess capacity, we think the RBNZ will leave rates on hold for several months to come. However, there is a high degree of uncertainty around …
18th March 2026
A very cautious easing cycle begins The scale of further interest rate cuts in Brazil – following Copom’s 25bp cut (to 14.75%) to start the easing cycle today – will hinge on the duration and intensity of the energy shock. But the sheer restrictiveness of …
The FOMC’s statement and dot plot today were arguably not as hawkish as many speculated, with the Summary of Economic Projections (SEP) still pointing to one interest rate cut this year, despite an upgrade to the median projections for inflation. That …
Limited changes from the FOMC as it waits for more clarity The FOMC’s statement and dot plot today were arguably not as hawkish as many speculated, with the Summary of Economic Projections (SEP) still pointing to one interest rate cut this year, despite …
The Bank of Canada sounded marginally dovish while keeping its key policy rate at 2.25% today, stating that the growth outlook had worsened and downplaying the risks of second-round effects from higher oil prices materialising anytime soon. This supports …
The inflation backdrop is growing increasingly problematic for the Fed and rate cuts are not likely anytime soon. That said, our sense is that the chance of rate hikes and a meaningful further sell-off in Treasuries driven by the conflict is limited. We …
Bank cautiously pushes back against rate hike expectations The Bank of Canada sounded marginally dovish while keeping its key policy rate at 2.25% today, stating that the growth outlook had worsened and that it would look through the Iran war’s immediate …
Inflation pressures uncomfortably strong before oil price surge The large upside surprise to the PPI in February confirms that stronger inflationary pressures were already making their way through supply chains even prior to the surge in oil prices. Final …
Growth pick-up won’t last Chile’s economy ended last year on a strong footing, with GDP rising by 0.6% q/q, but the energy price spike and fiscal tightening planned under President Kast will cause the economy to weaken in the coming quarters. The outturn …
Kenya’s reliance on energy imports from Gulf States leaves it amongst the most vulnerable on the continent to the conflict in the Middle East. The fragile external position leaves the onus on the government to either tighten fiscal policy or allow the …
Inflation slumps but energy shock presents clear upside risks The fall in South Africa’s inflation rate to 3.0% y/y in February provides welcome news for the Reserve Bank. But the energy shock will push up inflation and means rate cuts are off the cards …
The spike in energy prices has already caused Turkey’s central bank to tighten monetary policy and Pakistan may not be far behind. Most other central banks will be more reluctant to tighten but those in Indonesia, the Philippines, Mexico and parts of …
India’s state election cycle kicks back into gear next month with the energy shock from the Iran conflict reverberating across the country. That raises the stakes for New Delhi: if the crisis continues, the votes risk becoming an implicit test of the Modi …
Sri Lanka’s fragile external position makes it one of the countries most vulnerable to a sharp rise in energy prices, and the decision earlier this week to declare every Wednesday a public holiday for state-sector workers underlines how the crisis is …
Japan’s public finances are improving at an even faster pace than we had anticipated, supporting our long-held view that the country won’t experience a fiscal crisis anytime soon. The BoJ’s flow of funds accounts released today showed that the general …
The Gilt market has grabbed a lot of headlines since the start of the war in the Middle East, as government bond yields have surged by more in the UK than elsewhere in response to soaring oil prices. (See Chart 1.) The UK’s stock market, by contrast, has …
17th March 2026
Central banks face a classic policy dilemma when oil prices surge – inflation rises but growth might weaken. The right response depends crucially on why oil prices are rising, how persistent the shock is, and whether inflation expectations are at risk. …
There is no relief in sight for the troubled housing market, with the spike in global oil prices likely to push up mortgage rates in the coming weeks. That has led us to downgrade our forecast for house prices, which now look set to fall for the fifth …
The rise in energy prices resulting from the Iran conflict will have an adverse impact on most European economies. In the euro-zone, Germany and Italy are more exposed than France, though Germany has more scope for fiscal support. The UK is less exposed …
The Iran conflict has exposed Australia’s deep reliance on fossil fuels, reigniting debate over a green energy pivot. While the government has legislated ambitious climate targets, it has shown little inclination to provide meaningful budgetary support …
BI in wait and see mode with rupiah under pressure Bank Indonesia left its policy rate unchanged at 4.75% for a sixth consecutive meeting today and, while officials seemed sanguine about inflation risks, they are clearly concerned about the renewed …
Although the RBA’s decision to raise rates at its meeting today was made by the narrowest of margins, the split vote primarily reflected differences regarding the timing of the move rather than the need for tighter policy. With the Board clearly concerned …
While a partial unwind of earlier “excessive exuberance” may explain some of the huge swings in Korea’s equities since the Iran war began, we think the fundamentals of its earlier rally are stronger than they might seem. They could, therefore, hold it in …
Amid concerns that the ongoing energy price spike will adversely affect the inflation outlook, the RBA raised rates by 25bp at its meeting today. However, the decision was made by the narrowest of margins, raising some risks to our view that a follow-up …
Nascent manufacturing recovery underway before oil price surge The modest rise in manufacturing output in February, together with the upward revision to January’s already strong gain, keeps up the sense that a gradual factory sector recovery is underway. …
16th March 2026
This webpage has been updated with additional information since first publication. Base effects compound existing disinflationary pressure The further moderation in core inflation in February joins last month’s weak Labour Force Survey as reason to think …
