Energy Prices Surge as Geopolitics Complicate the Inflation Outlook

NatWest’s macro update highlights how escalating Middle East tensions have rapidly reshaped market expectations for inflation and interest rates. 

• Oil prices have moved above $100 per barrel, while natural gas prices have more than doubled in less than two weeks.

• Markets increasingly expect central banks to delay rate cuts, reflecting the inflationary implications of higher energy costs.

• In the U.K., housing sentiment and credit demand are stabilizing, though geopolitical risks could temper business hiring and investment.

Whether the shock proves temporary or structural will determine if central banks can resume easing—or must maintain restrictive policy longer.