Inflation and market reactions to rising oil prices are currently at the center of global investor attention. This week can rightly be described as a “central bank week,” as key monetary authorities across the world are making important policy decisions. These include the U.S. Federal Reserve, the European Central Bank, and the Swiss National Bank, as well as the Czech National Bank in Central Europe.
All of this is unfolding at a time when surging oil prices are beginning to seriously complicate the fight against inflation. Just two weeks ago, Poland cut interest rates, but such a move would be far more difficult to justify today. The term stagflation—a combination of weak economic growth and high inflation—is increasingly appearing in market discussions.
Meanwhile, the Reserve Bank of Australia has raised interest rates for the second consecutive time. If oil prices remain above $100 per barrel for an extended period, inflation in Poland could increase by around one percentage point.
Oil Flows Through the Strait of Hormuz
Data on global trade show that nearly nine out of ten barrels of oil passing through the Strait of Hormuz are destined for Asia. China alone consumes almost 5 million barrels per day, accounting for roughly 38 percent of all oil transported through the strait.
Other major recipients include India, South Korea, and Japan. In practice, between 84 and 89 percent of the oil transported through the Strait of Hormuz reaches Asian markets, while the shares of Europe and the United States remain relatively small.
Why Fuel Prices Are Rising in Europe
If Europe imports relatively little oil through the Strait of Hormuz, why are gasoline and diesel prices rising so sharply? The answer lies in the global nature of the oil market.
Even if a particular country does not directly purchase oil from the Persian Gulf, the market quickly reacts to risks affecting global supply. If traders begin to price in the possibility of losing up to 20 percent of global production, demand pressure increases significantly.
In such situations, Asian buyers begin competing aggressively with Europe for alternative supplies, such as oil from Libya or Norway. This competition quickly drives prices higher worldwide.
Fuel distributors also do not set prices based on the cost of fuel already stored in tanks—often purchased months earlier when Brent crude was significantly cheaper. Instead, they focus on the cost of future deliveries.
If Brent crude futures for delivery in May 2026 rise sharply, prices at gas stations react almost immediately. This is because companies must ensure they have sufficient liquidity to finance future fuel purchases.
A Difficult Scenario for Central Banks
While companies in the oil and gas sector may benefit from higher prices, the situation is far more challenging for central banks.
The primary concern is the growing risk of stagflation. Higher energy prices could once again accelerate inflation while simultaneously slowing economic growth.
At the beginning of the conflict involving Iran, the Polish Monetary Policy Council (RPP) cut interest rates by 25 basis points. Today, however, the prospect of further rate cuts around the world is becoming increasingly unlikely.
This is particularly important because several major central banks are making decisions this week. In addition to the Federal Reserve and the European Central Bank, policy decisions are expected from the Swiss National Bank and the Czech National Bank.
Focus on the Fed and the ECB
The most closely watched decisions will come from the U.S. Federal Reserve and the European Central Bank. In both cases, markets currently expect interest rates to remain unchanged.
In the United States, investors now assume that rate cuts will come later and more cautiously. Markets are currently pricing in only one rate cut in 2026, expected in December, although just a week ago no cuts were anticipated at all.
Even more important than the decisions themselves will be the press conferences following the meetings. Given the current geopolitical tensions and high levels of uncertainty, analysts expect a noticeable shift in tone.
Persistently high oil prices support a more hawkish stance, suggesting that central banks may delay the easing of monetary policy.
Australia Already Tightens Policy
The Reserve Bank of Australia has already moved in the opposite direction, raising interest rates for the second consecutive time.
In its statement, the bank emphasized that inflation risks have increased again. Inflation in Australia reached 3.8 percent in January, compared with 1.9 percent in June 2025.
Oil Prices Reshape the Global Economic Outlook
The sharp rise in oil prices is changing inflation expectations and disrupting the previous narrative surrounding monetary policy. Much now depends on how the conflict in the Persian Gulf evolves.
The duration of the oil market shock will be critical for the global economy. A short-lived spike in oil prices is something the global economy can usually absorb without major consequences.
However, a prolonged energy crisis would pose a far greater challenge.
If oil prices remain above $100 per barrel for several months, inflationary pressures and economic slowdown are likely to intensify. In Poland, such a scenario could push inflation about one percentage point higher.
On the other hand, any signal indicating a de-escalation of the conflict would immediately affect commodity prices and improve sentiment in financial markets.
Even so, it is important to remember that simply reopening oil transport through the Strait of Hormuz would not instantly normalize the situation. Returning to the conditions that existed before the current conflict would likely take several months, and some consequences could persist even longer.
