Even if a U.S.-Iran agreement is reached quickly, HSBC still believes that "the impact of inflation will persist, and more central banks will raise interest rates."

Even if a U.S.-Iran agreement is reached quickly, HSBC still believes that "the impact of inflation will persist, and more central banks will raise interest rates."

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In the latest report released by HSBC’s global economics team, the bank raised its forecast for the average price of Brent crude in 2026 to $95/barrel, and warned that even if the US and Iran quickly reach an agreement and the Strait of Hormuz reopens, the supply shock’s impact on global inflation will be hard to reverse, forcing more central banks to hike rates.

The report comes as the Strait of Hormuz has been closed for nearly 12 weeks due to the US-Iran conflict, and the market’s pricing is diverging.

Driven by broad-based earnings growth—not just technology stocks—the S&P 500 US stock index has hit record highs.

But the bond market selloff is intensifying, with US and UK 10-year government bond yields rising to multi-year highs.

The economy remains resilient, energy prices are quickly passing through to end-users

HSBC pointed out that actual economic activity data is better than expected: US jobs and corporate inventories are strong in early 2026, UK Q1 GDP is robust, and China’s exports in April are still growing—with inventory rebuilding as the main support.

However, global confidence indicators are declining, and the continued closure of the Strait means short-term outlook will worsen. Poorer regions—ASEAN, South Asia, Africa—have seen fuel rationing, crop abandonment, and shops closing early.

Energy prices are quickly passing through to end-users. Between February and April alone, energy contributed more than 1 percentage point to CPI increases in major US and eurozone economies; Southeast Asia is seeing much sharper impacts—Thailand reached 3.9 percentage points, Philippines 2.8 percentage points. US core inflation is also rising; airfares and rents are the main drivers. Pressure on food prices continues to heat up in the Philippines, Mexico, and India.

Oil price forecast raised to $95—the real risks extend beyond crude

HSBC increased its projected average Brent crude oil price for 2026 to $95/barrel, $15 higher than previously, assuming the Strait resumes gradually from mid-June and normalizes by the end of Q3. The revised baseline scenario is between previous “baseline” and “bad” scenarios.

Natural gas prices have performed better than expected, generally in line with HSBC’s “good” scenario, alleviating some fiscal pressures in Europe.

But the core warning of the report is: risks go far beyond crude oil. Refined oil products (aviation kerosene, diesel), fertilizers, sulfur, plastic feedstocks (naphtha, ethylene glycol), aluminum, and helium are all facing shortages, and stocks of refined oil products are lower and more fragile than crude. The Middle East accounts for 15%–20% of global exports in several key commodities.

Downstream effects will pass along the industrial chain to autos, semiconductors, packaging, and food. Asia—especially Thailand, Singapore, South Korea, and the Philippines—has the highest reliance on Middle Eastern supply.

HSBC judged: “For every extra day the Strait is closed, the range of affected commodities and oil-related products expands, and companies have no choice but to raise prices.”

Central banks raising rates: not overreacting, but defending credibility

Facing doubts about “whether rate hikes are premature,” HSBC says the lesson from lagging action in 2022 is clear. Analysts wrote in the report:

“Failing to stitch in time ultimately means having to stitch a lot more—now it’s about credibility.”

Specifically: The European Central Bank is expected to raise rates by 25 basis points each in June, July, and September (if the Strait reopens immediately, maybe only once), possibly reversing in 2027; the Bank of England and Bank of Japan may hike in June–July; the US Federal Reserve is expected to keep rates unchanged in its baseline scenario for 2026, but under new chairman Kevin Warsh, with supply shock from tariffs and migration policies, the risk of a rate hike within the year should not be underestimated. In emerging markets, the Philippines, India, Indonesia (in H2), Poland, Czech Republic, and South Africa are expected to hike further, and currency depreciation is increasing rate hike pressure. Australia and Norway may have completed this round of hikes.

In general, HSBC’s overall stance is hawkish and prudent: supply-side shocks are persistent and expand non-linearly, and Asia and Europe are more vulnerable than the US. The biggest uncertainty remains when the conflict will end—every extra day makes the “stitch in time” cost higher.

Risk DisclaimerThe market carries risk; investments must be made with caution. This article does not constitute personal investment advice and does not take into account specific users’ unique investment goals, financial situation, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article fit their individual circumstances. Investments made based on this article are at your own risk. ```