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Back to the 1970s? Investors Brace for a Return of Stagflation
Oil prices surged 70% this year amid Middle East conflict, pushing inflation expectations higher and causing central banks to reconsider rate hikes, raising stagflation concerns globally.
- On March 9, 2026, investors began pricing a stagflationary shock as Brent crude vaulted above $100 and rose 70 per cent year-to-date amid Middle East conflict.
- Rising energy costs tend to damp growth and lift inflation as oil price surges contributed to U.S. recessions in 1973, 1980, 1990 and 2008, and the International Monetary Fund estimates a 10 per cent rise lowers global economic output by 0.1–0.2 per cent.
- Short-Dated bonds have been the most sensitive, selling off sharply as Britain's two-year gilt yields jumped nearly 50 basis points, German and Australian two-year yields rose more than 30 bps, and British five-year breakeven inflation rates hit almost 3.5 per cent on Monday.
- Markets now price at least one European Central Bank hike this year and a chance of a Bank of England hike, while the dollar has strengthened as the main safe haven and U.S. bonds outperformed German last week.
- Capital Economics quantifies how oil moves feed into inflation, noting 'A useful rule of thumb is that a 5 per cent rise in oil prices adds around 0.1 per centage points to developed market inflation', and investors avoid stagflation as gold dropped 2 per cent last week amid U.S. job losses in February.
12 Articles
12 Articles
Times of India
The Economic TimesGlobal Market | Energy shock from Middle East conflict puts global economy on stagflation watch
Global markets fear a 1970s-style stagflation. Rising oil prices are a major concern. This could mean high inflation and slow economic growth. Central banks face tough choices. Investors are adjusting their expectations. The situation depends on further conflict escalation and its impact on energy supplies.
DIY investors set on oil and energy after Middle East conflict
Two in five (40%) self-directed investors – or DIY investors, who actively choose their own investments – are looking to increase their exposure to oil as a result of the US-Israel war on Iran. This comes as the price of Brent crude, the international benchmark of oil, has been fluctuating greatly since the conflict began, reaching a four-year high of $120 a barrel at one point, though has now dropped to just under $92 a barrel after suggestions…
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