Ongoing instability in the Middle East continues to influence global oil prices. After last week’s sharp increases, yesterday saw WTI crude prices fall by around 2%, despite the continuing conflict. The drop was prompted by emerging reports suggesting possible de-escalation. Initially, prices fell by as much as 4.5% before rebounding. This week, fuel prices in Poland are expected to rise by up to 20 groszy per liter, and further increases in global oil prices could hinder the fight against inflation and delay interest rate cuts.
Oil Prices React to De-escalation Hopes
Following news of a possible easing in the Israel–Iran conflict, WTI crude prices dropped 4.5% on global markets before ending the day with a net decrease of 2%. Though modest, the decline came after a dramatic surge the previous week. On Thursday, June 13, Brent crude rose by 13% intraday—the largest spike since the outbreak of the war in Ukraine in 2022—before closing the day up 7%.
Will High Oil Prices Last?
Not necessarily. While recent volatility reflects market anxiety, the underlying fundamentals do not suggest a long-term supply crisis. Global demand remains steady, and OPEC+ had already curbed output prior to the conflict. Crucially, spare production capacity—mainly in Saudi Arabia—remains available, estimated at up to 4 million barrels per day. For context, Iran’s total production is around 3 million barrels daily, meaning this buffer provides a strong safeguard against lasting price shocks.
However, concern persists over the strategic Strait of Hormuz, a narrow passage through which 30% of the world’s seaborne oil flows. While any conflict in the region carries risk, a complete blockade remains unlikely. Iran also relies on the strait for its oil exports, and closing it would damage its own economy and trade relationships, especially with key partners like China.
Oil Markets Are Historically Volatile—But Also Resilient
Geopolitical events frequently cause sharp short-term price movements, but these often reverse quickly. This pattern was seen after Russia’s 2022 invasion of Ukraine, and during both Gulf Wars. A rare exception was the 1970s oil crisis, when prices skyrocketed by 300%, plunging the world into recession. Today, however, the world is better equipped: information flows faster, logistics are more agile, and investors react more quickly to risks. This helps prevent temporary price spikes from evolving into long-term trends.
Impact on Inflation and Monetary Policy in Poland
Nonetheless, rising oil prices could complicate efforts to curb inflation, both in Poland and globally. In the past week, oil prices surged from around $60 to over $70 per barrel, a nearly 15% increase. For Polish drivers, this means more expensive refueling. Current increases may raise gasoline prices by around 20 groszy per liter, but if the trend continues, the price of both gasoline and diesel could climb by 30–40 groszy per liter.
Such increases, while seemingly minor, can reignite inflationary pressures, given the strong correlation between fuel prices, transportation costs, and the overall consumer basket. Notably, declining fuel prices have been a key driver of falling inflation in recent months.
Although inflation in Poland has significantly eased, a sustained rise in fuel prices could reverse this progress. In such a scenario, the Monetary Policy Council (RPP) may find additional justification to keep interest rates unchanged. Should tensions in the Middle East escalate and oil surpass $80 per barrel, inflationary pressures could return quickly.
Author: Paweł Majtkowski, Analyst at eToro Poland
Source: ceo.com.pl – Fuel Prices in Poland to Rise by Up to 20 Groszy per Liter This Week
