Oil prices hit near-record highs as global trade routes face prolonged disruption
Global economic concerns are growing as oil prices surge and key trade routes remain disrupted. The Suez Canal has yet to recover from Houthi rebel attacks in late 2023, raising fears about further instability in the Strait of Hormuz. Meanwhile, the European Central Bank (ECB) has outlined emergency measures to tackle potential energy shocks from the escalating Iran conflict. Current oil prices have reached alarming levels, hovering between 112 and 116 US dollars per barrel as of late March 2026. These figures far exceed pre-crisis levels of 60 to 85 dollars and sit near the 95th percentile of the ECB's expected price range—a sign of a severe shock. The bank's adverse scenario warns of stagnant economic output in 2026, with only a slow recovery by late 2028. A deeper energy crisis could even trigger a mild recession.
ECB President Christine Lagarde has proposed a three-part strategy to address the turmoil. The plan involves ignoring minor price spikes, adjusting policy for large but temporary inflation surges, and taking strong action if inflation remains persistently high. Under the worst-case scenario, the ECB's deposit rate might climb to 2.5% by mid-2027.
Beyond Europe, Japan's top currency official has signalled readiness for decisive steps to prevent further weakness in the yen. The IMF, too, is preparing to revise its global forecasts, predicting higher prices and slower growth. JPMorgan's Karen Ward, however, believes the Bank of England will hold off on raising interest rates in 2026. The ECB's severe scenario suggests prolonged inflation, requiring a robust policy response if conditions worsen. With trade routes still under pressure and oil prices at near-record highs, governments and central banks are bracing for prolonged economic strain. The coming months will reveal whether these measures can stabilise markets or if further interventions will be needed.
