The resurgence of the conflict with Iran and rising oil prices risk fueling a new wave of inflation, as rising fuel prices continue to put pressure on prices, a new eToro analysis reveals.
“The re-emergence of the conflict with Iran is once again causing oil and fuel prices to rise worldwide and bringing inflation fears back to the forefront. In June, the annual inflation rate in Romania decreased slightly, from 10.9% to 10.4%. The price of electricity increased by 59.97% compared to the same period last year, an effect resulting from the removal of price caps last year, with electricity, gas and heating registering an increase of 35.17%. Fuel prices remained high, with diesel increasing by 28.16% and gasoline by 22.74% compared to 12 months ago,” says eToro analyst Bogdan Maioreanu.
According to the cited source, Iran’s attempts to block the Strait of Hormuz again and US attacks on several targets in the Islamic Republic have led to the increase in oil prices.
“After a low of $71.57 on July 1, the price of Brent crude oil futures for September delivery reached almost $80 on Monday. Meanwhile, the price of WTI crude oil reached almost $75,” the document states.
The current increase in global oil prices is also starting to be felt at the pumps, after a brief respite caused by the ceasefire in the middle of last month, the cited source states.
According to the peco online website, in Romania, compared to last month, the average price of a liter of gasoline decreased by 4.3%, while the average price of a liter of diesel increased by 1.9%.
Inflation data for June shows that, on an annual basis, gasoline became more expensive by almost 23%, while diesel prices increased by over 28%. The increase in fuel prices will continue to influence inflation in Romania, which in June remained the highest in the European Union, at 10.42%, the analysis also shows.
In this context of renewed geopolitical tensions, the resurgence of the conflict with Iran risks transforming today’s oil shock into a new, larger inflationary surge tomorrow, the cited source comments.
According to the latest eToro “Retail Investor Beat” survey, inflation represents the main external risk for Romanian investors’ portfolios (24%), while for investors around the world, inflation is in third place (19%).
The Gulf conflict adds a new factor of uncertainty regarding the evolution of prices and interest rates, the analysis notes. “If this conflict intensifies or the Strait of Hormuz remains blocked, pressure on energy prices could complicate central banks’ fight against inflation just when they were hoping to declare victory, making the coming weeks critical for both policymakers and investors,” the statement added.
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