The markets are starting the new week with a fairly clear message: the energy crisis has returned to the forefront of the global stage. Central banks have a difficult task in deciding what to do with the interest rates as initial plans to lower them to boost growth now look implausible, while “stagflation” – economic stagnation accompanied by high inflation – is a word that seems to find traction in many European economies, Romania included, eToro analyst for Romania, Bogdan Maioreanu.
According to global trade data, nearly nine out of ten oil barrels passing through the Strait of Hormuz are destined for Asia. China alone consumes nearly 5 million barrels per day (approximately 38% of the total), followed by India, South Korea, and Japan. In practice, between 84% and 89% of the traffic passing through the strait is destined for Asian markets. Europe and the United States account for only a marginal share. The United States imports approximately 0.7 million barrels per day via this route. Europe even less. The famous “20% of the world’s oil” is, therefore, a global figure, not a Western one. The direct risk primarily concerns Asian energy security.
If this is the case, then why are the prices of gasoline and diesel climbing? There are a few reasons. Even if a country doesn’t buy oil from the Strait of Hormuz, oil is a global commodity. If 20% of the world’s crude oil were to disappear, Asia would begin to compete fiercely with Europe to get its hands on Libyan or Norwegian barrels, causing a sharp rise in prices for everyone. It is not a matter of “ships not arriving,” but of a global auction that risks suddenly becoming more expensive.
Distributors do not set prices based on how much they paid for the oil already in their tanks (purchased months before the price explosion, when Brent was trading much lower), but on how much it will cost them to buy the next shipment. If the price of Brent crude for May 2026 skyrockets, the price at the pump adjusts instantly to ensure the company has the necessary cash flow for future purchases.
And last but not least, there is a “rocket and feather” effect related to the elasticity of prices. Fuel prices react like rockets to negative news, and we have seen the immediate spike when the Iran conflict began, and like feathers to positive news, with a slow and sluggish decline.
While companies in the oil and gas sector are currently happy with the current prices situation, the development is more of a nightmare for central banks. The risk of stagflation is rising. Higher energy prices could reignite inflation while simultaneously slowing economic growth. For Romania, with the highest inflation in the European Union, this situation is even more problematic as the country is also faced with the need to curb its budgetary deficit.
Markets have already adjusted their expectations quickly. In the US, investors now expect interest rates to be cut later and less aggressively. Currently, only one rate cut is expected for 2026, in December, while last week there were none forecasted. This week, both the Federal Reserve and the European Central Bank will announce their latest interest-rate decisions. Both central banks are expected to keep rates unchanged. The following press conferences will be even more important. Previous monetary policy plans have largely been thrown overboard, and central banks now have to steer their ship through dense fog. As a result, the tone of central bankers is likely to shift. Persistently high oil prices currently point toward a hawkish pause. For Romania, this will be no news as the high persistent inflation is, anyhow, most likely making the NBR pause.
According to the latest eToro Retail Investor Beat survey, in December 2025, the main risks investors were seeing this year for their portfolios were a recession of the global economy, inflation, a recession of the local economy and the prospects of an international conflict. We are now at the point where all these risks are starting to materialize. A signal came this morning from the central bank of Australia (RBA), which raised the interest rate for the second consecutive meeting this year, bringing rates up to 4.1%. The board noted inflation risks have tilted further to the upside. And the latest January figure of Australia’s yearly inflation is 3.8%, but rose from 1.9% in June 2025.
Investors are currently moving from headline to headline as they try to assess the situation in the Middle East. The rise in oil prices is changing the inflation picture and disrupting the monetary policy narrative of recent months. It is not clear how and when this Gulf conflict may end. The duration of the oil shock will be crucial for the global economies. A short-term spike in oil prices can usually be absorbed. A prolonged energy crisis would be far more problematic. If prices remain above $100 per barrel for several months, the pressure on inflation and economic growth would likely increase significantly. However, any sign that this conflict is coming to an end will have an immediate impact on commodities’ prices and on the financial markets, although the resumption of oil traffic through the Strait of Hormuz will not immediately lead to a normalization of the oil supply situation.
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