Inflation fears return as Iran war keeps oil prices high: analysts
Oil prices fell in early trading Friday but remained on track for weekly gains as the United States and Iran continued trade attacks.
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Inflation fears are back on the table amid concerns about rising tensions between the US and Iran in the Middle East conflict, which is keeping oil prices high, analysts say.
BlackRock estimates the conflict will add about 0.8 percentage points to global headline inflation, but the impact may not be the same across all regions.
Some parts of Europe and Asia that are more reliant on energy imports will be more exposed to global headline inflation, BlackRock said in a note.
OCBC agreed in its report that “a fresh energy shock will cause the Fed to focus on upside inflation risks as labor market data point to stability rather than deterioration.”
While rising profit margins in the stock markets of U.S. small- and medium-sized companies are a positive development, “I’m not sure these trends can withstand a few more quarters of higher oil prices and ongoing inflation pressures,” Yung-Yu Ma, chief investment strategist at PNC Asset Management, said on CNBC’s “Squawk Box Asia.”
Ma thinks the Fed’s hawkish tone is “here to stay,” “until we start to see relief in the energy markets, the oil markets and some of the other inflationary pressures that are on a new upward path.”
“Here we should consider a balanced portfolio where we can diversify some of this risk,” Ma said.
