Oil Surge Following Iran Strikes Threatens Fresh Wave of Global Inflation, Warns deVere CEO

 

Oil’s sharp rally in the wake of escalating U.S. military action against Iran risks reigniting global inflation just as major economies were beginning to regain price stability, according to Nigel Green, Chief Executive of global financial advisory giant deVere Group.

Brent crude briefly surged above $82 a barrel during Asian trading before easing to around $78 — still roughly 7% higher on the session — as geopolitical tensions injected renewed volatility into global markets.

Green cautions that the spike comes at a particularly sensitive moment for policymakers.

“Investors are now confronting a renewed inflation threat at a time when price growth in major economies remains above — or only just approaching — central bank targets,” he said.

“When Brent rises at this pace, the inflation arithmetic shifts quickly across developed economies.”

UK: Inflation Risks Re-Emerge

The Bank of England estimates that a 10% increase in Brent crude typically adds between 0.2 and 0.3 percentage points to UK inflation. Green argues that the broader implications of such a move may be underappreciated.

“A sustained rise of this magnitude would materially lift headline CPI in the UK,” he said. “Policymakers who believed inflation was steadily moving back toward target would face renewed pressure.”

UK inflation remains above the Bank’s 2% objective, with services inflation proving particularly sticky. An additional energy-driven impulse could risk entrenching higher inflation expectations among households and businesses.

United States: Fuel Costs and Sentiment

The warning extends across the Atlantic.

“U.S. inflation remains highly sensitive to fuel costs,” Green noted. “Gasoline prices feed directly into consumer sentiment and inflation expectations. If crude moves toward $90 or even $100, the pass-through into CPI becomes unavoidable.”

While the Federal Reserve focuses on core inflation measures that exclude food and energy, sustained increases in oil prices typically cascade through the broader economy.

“Oil does not operate in isolation,” Green said. “Higher freight costs, rising airline fuel bills, and elevated manufacturing inputs ultimately filter into consumer prices. Corporate margins either tighten — or businesses pass costs on. Often both.”

Europe: Structural Energy Exposure

In the euro area, recent moderation in headline inflation has been supported in part by softer energy prices. A reversal would complicate the European Central Bank’s easing trajectory.

“Europe is structurally more exposed to imported energy volatility,” Green explained. “Any disruption to Middle Eastern supply routes tightens the supply-demand balance and amplifies price swings. Inflation progress across the bloc could stall.”

Australia: Household Pressures Intensify

Australia faces similar vulnerabilities. With inflation still running above the Reserve Bank of Australia’s 2–3% target band, additional energy pressure could delay anticipated policy relief.

“Australian households are already grappling with elevated living costs,” Green said. “Fuel and transport expenses are highly visible. A prolonged crude rally would quickly filter into domestic inflation data.”

Beyond the Numbers: Behavioral Spillovers

Green also emphasized the behavioral dimension of energy-driven inflation.

“If businesses anticipate sustained increases in input costs, pricing decisions adjust pre-emptively. If workers expect higher living expenses, wage demands strengthen,” he said.

Geopolitical escalation increases the risk of disruption in the Strait of Hormuz, a strategic corridor responsible for roughly one-fifth of globally traded crude. Even absent a physical blockade, risk premiums can expand sharply during periods of military tension.

“History shows that markets price risk before barrels disappear,” Green observed. “Insurance costs rise, shipping routes shift, futures curves steepen. Volatility alone can sustain higher benchmark prices.”

Central Banks Forced Back on the Defensive?

Sustained oil strength would also constrain central bank flexibility.

“Rate-cut expectations would weaken under persistent oil pressure,” Green warned. “Central banks cannot ignore an externally generated price surge. Policy would remain tighter for longer, weighing on growth.”

Financial markets, he added, are beginning to factor in that possibility.

“Equities can absorb temporary spikes,” he said. “But extended conflict changes the calculus. Earnings forecasts assume stable input costs. If crude remains elevated, revisions will follow.”