LIVE MARKETS-Iran war a manageable shock say Societe Generale

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IRAN WAR A MANAGEABLE SHOCK, SAY SOCIETE GENERALE

The Iran war has turned market expectations for the likes of inflation and interest rates upside down, but the actual economic fallout could be limited.

Societe Generale economists expect “the disruption to Gulf energy flows lasts throughout March and then gradually eases from April, with only limited lasting damage to regional production capacity," according to their latest Global Economic Outlook.

“Policy support, including releases from emergency reserves, helps to stabilise supply, while Chinese precautionary buying pauses temporarily as prices settle.”

This would see oil prices spike sharply in March, but then recover in the following months.

“For the global economy, a shock of this magnitude and duration should be manageable,” the economists said.

The growth impact would be limited, thanks to AI capex-fulled resilience and various other factors such as fiscal stimulus, they explained.

“But it will add to near-term inflation, albeit not to the extent that central banks have to respond with tightening,” the report said.

Yet, it added, expectations have shifted to "less and later easing from central banks" - although not just because of the oil price shock.

(Sophie Kiderlin)

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