Oil: Elevated prices sustain inflation spillovers – Commerzbank

Commerzbank analysts argue that persistent geopolitical tensions in the Persian Gulf will keep Oil near $100, with restricted Strait of Hormuz traffic driving volatility. They see firms already passing higher energy costs through to customers, increasing the risk of broader price pressures and reinforcing ECB tightening pressure as long as elevated energy prices persist.

Persian Gulf tensions keep Oil elevated

"We expect to see a rollercoaster of good and bad news over the next two months. After all, the path toward an agreement between the U.S. and Iran is likely to be bumpy. Even with a framework agreement between the US and Iran, there are likely to be repeated setbacks and isolated military actions."

"As a result, the oil price is likely to fluctuate around the $100 mark, because maritime traffic through the Strait of Hormuz will remain at least restricted."

"In such a scenario, the pressure on the ECB to act would remain high. This is all the more true given that surveys show that companies are passing on their higher energy costs to customers quite quickly."

"The longer energy prices remain high, therefore, the greater the risk of indirect effects on the prices of other goods and services."

"This risk is unlikely to diminish as long as energy prices remain high."