Iran War Stokes Oil Prices, Inflation Fears; Global Reserve Depletion Accelerates

The Iran war is bleeding into the real economy. Crude oil, pressured by Middle Eastern supply disruptions and tanker rerouting around the Strait of Hormuz, remains in elevated territory. HSBC raised its silver forecast to $75/oz by 2026, citing industrial and investment demand, but the more binding constraint is energy. Turkey's central bank revised its year-end inflationThe rate at which prices rise across an economy. target to 24%, citing the effects of higher oil prices. India is asking the US for an extension of its Russian oil import waiver, as the 11-week conflict has disrupted energy supply chains in the Persian Gulf.

For Asia, the war is a vicious headwind. Foreign-exchange reserves are slumping across the region as policymakers burn through reserves to defend their currencies against oil-driven inflationThe rate at which prices rise across an economy.. The Philippines and India have been hit hardest, with reserve depletion accelerating. A Japanese supertanker recently made an undercover transit through the Strait of Hormuz, a rare and risky maneuver that signals how tight energy logistics have become. Meanwhile, two India-bound LPG carriers have resumed Hormuz transits, but the overhead cost and risk premium on energy shipping has jumped.

The second-order effects are beginning to surface. Air New Zealand flagged a full-year loss driven by jet-fuel costs amplified by the Iran war. Singapore Airlines' net profit declined as its stake in Air India was dragged down by the conflict's impact on aviation margins. Sapporo Holdings suspended beverage exports to the Middle East due to war-related uncertainties. These are not headline shocks but death-by-a-thousand-cuts margin compression across sectors exposed to energy costs.

The macroeconomic risk is stagflation: elevated oil prices without a corresponding surge in growth. Central banks in Turkey, India, and the ECB are all sounding the alarm on inflationThe rate at which prices rise across an economy. expectations becoming unanchored. If oil stays above $75 through 2027 (as Hunt Oil's CEO expects for a "nightmare scenario" of sustained Middle East unrest), then emerging markets face a liquidity squeeze and developed-market central banks face a dilemma between defending growth and controlling inflation. This is a headwind for risk assets globally.