- The conflict in the Middle East could lead to elevated inflation through energy and trade channels, although the persistence would depend on the scale and duration of the skirmishes.
- Iran is a major oil producer and sits astride key shipping routes, such as the Strait of Hormuz. Military disruptions and shipping insecurity would raise global oil, gas and fertiliser prices, feeding directly into headline inflation and indirectly into core inflation via higher transportation, manufacturing and food costs.
Short-term boost to headline inflation in 2026.
- - Read this at SGinvestors.io -
- The US has become less sensitive to energy shocks compared to the 70s due to limited pass through to wages and long-run inflation expectations assuming monetary policy is kept tight.
Higher bond yields are broadly positive for banks.
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- In the US, the yield curve has flattened with shorter dated yields rising more sharply. The 2-year and 10-year US government bond yield gained 54bp and 49bp respectively to 3.91% and 4.43% in Mar 26.
- In Singapore, the yield curve remains steep. The 2-year and 10-year SG government bond yields increased by a smaller 30bp and 46bp respectively to 1.69% and 2.41%.
Extended pause without rate cuts.
- Read more at SGinvestors.io.
