Central Banks Divided on Response to Possible Jump in Energy Prices

Central banks are at odds over how to respond to a possible jump in energy prices should the Israel-Hamas war escalate. While rate-setters have conventionally ignored volatility in the energy markets, central bank heads in Canada and the UK have signalled they would need to address the inflationary risk of higher oil and gas prices .

The ECB rate-setter drew a distinction between market tensions, which could be safely ignored, and a more problematic full-scale supply shock, such as if Iran were to attempt to close the Strait of Hormuz, through which a third of liquefied natural gas and a quarter of oil is transported. A major event like this would raise parallels with the 1973 Arab oil embargo against the US, which quadrupled crude prices.

Central Banks Energy Prices Israel-Hamas War Inflation Oil And Gas Prices

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