Oil, War, and a Market Turning Point

Archive edition · Market data and company circumstances reflect 4 April 2026, when this newsletter was sent.

The Shock Markets Can’t Ignore Anymore

Yesterday, markets were hoping for clarity. Instead, they got uncertainty and that has changed everything.

Oil moved higher. Equities came under pressure. Currency volatility picked up. What was earlier seen as a temporary disruption is now being reassessed as something more persistent. This is no longer just a geopolitical development. It is a macro shift.

At the center of it is energy. With disruptions around a key global supply route, analysts expect oil prices to remain elevated in the near term, with short-term averages above $100 before easing later in the year. But the key change is not the level of prices. It is the uncertainty around how long they stay elevated.

Energy Is Back at the Center

Energy is not just another input cost, it is embedded across the entire economy.

Before this shock, inflation across many emerging markets had cooled back toward pre-pandemic levels. Now, that trend is reversing.

Analysts are revising inflation expectations higher by roughly 1 percentage point across emerging markets, with larger increases in more vulnerable economies.

This is how a supply shock becomes a broad inflation cycle.

• Transport becomes more expensive
• Manufacturing costs increase
• Food inflation rises through fertilizer and logistics
• Supply chains tighten

The Return of Stagflation Risk

Inflation pressures are rising across emerging markets, with sharp divergence. (Source: Goldman Sachs)

At the same time that inflation is moving higher, growth expectations are moving lower, creating a far more challenging macro backdrop. This combination of slower growth and higher inflation is the very definition of stagflation, one of the most difficult environments for both policymakers and investors.

The complexity arises because it introduces a clear policy dilemma. If central banks choose to support growth, they risk allowing inflation to accelerate further. If they decide to fight inflation aggressively, it comes at the cost of slowing growth even more. There are no straightforward solutions in such a setup, and every policy choice carries trade-offs.

This is precisely why markets are reacting sharply, not just to the geopolitical event itself, but to what it implies for future policy direction, interest rate paths, and the broader economic trajectory from here.

A Highly Uneven Impact

This environment is not uniform. It is highly uneven, with clear divergence across economies depending on their structure, dependencies, and policy flexibility.

Most Exposed

Energy-importing economies are facing the most immediate pressure. Countries such as India, the Philippines, Thailand, and parts of Eastern Europe are particularly vulnerable as they rely heavily on imported energy. For these economies, the impact is multi-layered. Higher import bills strain external balances, currency pressure adds volatility, and inflation pass-through quickly feeds into domestic prices, making the shock both immediate and persistent.

Most Fragile

Some economies face an even more amplified risk due to already unstable inflation dynamics. Countries like Argentina and Turkey fall into this category. In these markets, inflation expectations are less anchored, which means that external shocks do not just pass through, they accelerate rapidly, making stabilization significantly more difficult.

Relative Beneficiaries

Not all outcomes are negative. Energy exporters outside the conflict zone, such as Brazil and Russia, stand to benefit from higher commodity prices. These economies gain from improved trade balances and stronger fiscal positions, while largely avoiding the supply disruptions affecting other regions. This creates a relative advantage in an otherwise challenging global environment.

Hidden Stress Channels

Beyond the immediate impact of energy prices, a range of less visible risks are beginning to build. Some economies are already experiencing energy rationing, while key industrial sectors such as fertilizers and petrochemicals are facing increasing pressure.

At the same time, trade disruptions and logistics bottlenecks are slowing economic activity, and there is a growing risk of weaker remittance flows in countries dependent on overseas income. These second-order effects often prove more persistent and economically damaging than the initial shock itself.

Policy and Markets

Governments are already responding, but they are operating within tight constraints. On the fiscal side, the immediate response has been through subsidies and targeted support aimed at cushioning households and critical sectors from rising costs. On the monetary side, central banks are becoming more cautious.

Many are delaying rate cuts, and in some cases, preparing for rate hikes as inflation pressures begin to rebuild. Analysts expect tightening in economies such as India and the Philippines, reflecting the need to balance inflation control with currency stability.

At the same time, markets are already adjusting to this shift in real time. Oil moving higher signals that supply risks are being taken seriously, weaker equities reflect rising concerns around growth, and increasing currency volatility points to building global stress. Taken together, these are not isolated moves. This is coordinated macro pricing, where different asset classes are aligning to reflect a changing economic environment rather than reacting randomly to short-term news.

What This Means for Investors

The most important takeaway is this: The risk is no longer balanced. It is tilted toward more adverse outcomes.

This creates a different kind of market. Not one driven by broad rallies, but by dispersion and selectivity.

• The conflict may last longer
• Supply disruptions may deepen
• Inflation could broaden
• Policy flexibility is limited

What to focus on:

• Energy as the core macro driver
• Inflation expectations (not just data)
• Currency movements as real-time stress indicators
• Structural winners like commodity-linked economies

Archive note

This article preserves the analysis in our weekly newsletter sent 4 April 2026. Market prices, forecasts and company circumstances reflect the time of publication and may have changed.

This material is general information, not personal financial advice or a recommendation to trade. Investing and trading involve risk, including loss of capital.