Economics Quarterly

The report evaluates the economic impacts of the Middle East conflict, noting a precarious recovery in shipping traffic through the Strait of Hormuz. While the US economy shows resilience, Euro area growth remains burdened by higher energy costs and inflationary pressures.

Key Takeaways

• 1.The US-Iran memorandum of understanding has opened a fragile diplomatic window, reducing immediate risks of energy shortages while oil prices remain high.
• 2.Developed economies face diverging growth: US resilience remains while the Euro area experiences a slowdown due to inflationary spells and energy costs.
• 3.Central banks must balance vigilant monetary policy to prevent second-round inflationary effects against growth risks during high uncertainty.

Table of Contents

• Geopolitics: the new rules of the game
• Developed economies: a highly conditional scenario
• Emerging markets: resilience, but four main risks
• Oil: hopes of an easing of tensions in the Strait of Hormuz
• Gas: a timely deal, but one that has yet to be finalised
• Autos: restructuring underway
• Semi-conductors: constrained by huge demand for AI
• Shipping: towards a gradual recovery in traffic through the Strait of Hormuz
• Monetary policy: guarding against second-round inflationary effects
• Interest rates: a little patience
• FX: depending on the risks but not only

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