The closure of the Strait of Hormuz has produced the same dilemma in every central bank: inflation rising, growth slowing, and monetary policy caught between the two. But this single shock finds the affected countries at very different levels of preparedness, writes eToro analyst for Romania, Bogdan Maioreanu.
The United States, Europe, and Romania now sit on concentric rings of vulnerability, and the distance between them is widening by the week. Romania is not just the most exposed economy to the external shock, it is brewing its own supplemental crisis on top of the global oil supply one.
At the global level, the problem is structural. An oil supply shock simultaneously pushes inflation up and growth down, pulling central banks in two incompatible directions at once.
Raising rates to fight inflation risks tipping already-slowing economies into recession. Cutting rates to support growth risks might let inflation become entrenched. There is no clean policy lever. But the situation is different on both sides of the Atlantic. The US is insulated, but not immune; Europe is in a weak spot, while Romania is in a very fragile state.
In Romania, the Iran shock did not arrive in a vacuum, it ambushed an economy already running the EU’s highest inflation and a fiscal deficit under an EU-mandated consolidation program. Then energy prices spiked. Romanian inflation had slowed as expected to 9.3% in February 2026, but under the fuel prices shock, it bounced back to 9.9% in March, a value not seen since September 2025.
The surging global energy prices now threaten to reverse the inflation deceleration trend and prevent the central bank from easing monetary policy anytime soon. At its April 7 meeting, the NBR held the policy rate at 6.5%, noting that Q2 inflation will step up to higher than-previously-anticipated levels, mainly following influences expected from costlier fuel and natural gas prices. The last interest rate cut was in August 2024. NBR’s governor Mugur Isărescu has been blunt about the stakes. “The ongoing conflict in the Middle East generates significant risks, including upward pressure on energy prices, a deterioration in economic growth prospects, and increased risk aversion on international financial markets.”
On top of this backdrop, a political crisis is brewing in Romania following the PSD party’s decision to withdraw its support for the premier Ilie Bolojan. The Bucharest Stock Exchange was the first one to react, posting an almost 2% loss yesterday. Until now, rating agencies S&P and Moody’s have maintained Romania at at the lowest rung of investment grade, one notch above speculative grade (junk status) but have flagged persistent economic and political risks and a negative outlook.
With the risks starting to materialize, the Junk rating might come into play again, threatening to further raise borrowing costs for the government at a time when the budget is already under pressure, delaying economic relief measures. In addition, failure to implement further reforms by August might mean Romania losing some of the 10 billion euros’ worth of EU recovery and resilience funds. As the situation is still ongoing, it is hard to predict now if it will materialize or not, but the prospects of a political crisis overlapping a global one are never good.
Europe entered the current crisis with a dangerous combination: a weak growth outlook, high import dependence on Gulf energy, especially when it comes to natural gas, and structurally low gas reserves after a harsh winter. Against storage levels estimated at just 30% capacity, the Dutch TTF gas benchmarks nearly doubled to over 60 EUR/MWh by mid-March, returning now to about 39 EUR/MWh. It is still 26% higher than it was before the conflict started. The ECB postponed its planned rate reductions on 19 March, and analysts now expect it may deliver an outright hike at its 30 April meeting to keep long-term inflation expectations anchored. In this case, Europe is, in effect, resolving its dilemma in favour of inflation control, accepting a possible recession as the price of credibility.
The US remains the least-exposed of the three to the current crisis. Many analysts expect America to be one of the last places to be hit, because it’s less reliant on Hormuz than buyers in Asia and is the world’s biggest LNG exporter, with a domestic gas market relatively insulated from the war. The transmission runs through gasoline prices – already above $4 per gallon (over $1 per liter), the highest since late 2023, rather than outright shortages. Fed Chair Jerome Powell pointed to the uncertainty: “The thing I really want to emphasize is, nobody knows. The economic effects could be bigger, they could be smaller.” Before the US entered the Iran conflict, markets were pricing roughly 0.5% of Fed easing for 2026. That path has effectively vanished. CME FedWatch now predicts the Fed won’t issue a single rate cut in 2026, with the first one in July 2027.
One shock, three outcomes. The US has domestic energy and a reserve currency as buffers, while its economy is still growing moderately at around 2% of GDP. Europe has institutional credibility but is absorbing visible industrial damage, with the eurozone in stagnation. Romania inherits the full force of the shock on top of pre-existing economic fragility, with the highest inflation in the EU, a technical recession and now political instability added on top.
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