Oil shock 2026

The US and Israeli attack on Iran brought the issue of geopolitical risk on the supply side back to the markets. Oil became the main barometer of nervousness during the week. At the end of the week, Brent was trading at around USD 86-87 per barrel, heading for a weekly gain of almost 20%, while US WTI was close to USD 84, with a weekly gain of 25%. This was the sharpest weekly movement since the first months of the war in Ukraine. The market is not only reacting to the bombing itself, but above all to the risk of disruption to oil flows from the Persian Gulf.

The key point is the Strait of Hormuz, through which approximately one-fifth of the world's oil flows. Iran has stopped tankers from passing through, and a number of ships have already faced attacks. At the same time, there are outages in refineries and petrochemical plants in Asia, a region that is extremely dependent on supplies from the Middle East. This means that the current price increase is not just a speculative markup, but also reflects real concerns about physical supply constraints.

The most important impact on the Czech economy is on fuel prices. According to CCS data, as of March 4, the average price of Natural 95 rose to CZK 34.68 per liter and diesel to CZK 35.10. Compared to the previous week, this is roughly CZK 1.2 more for gasoline and CZK 2.1 more for diesel. If Brent remains at its current level, the revaluation is probably not over yet. The price of petrol could rise to between CZK 35.5 and CZK 36.5 per liter, and diesel to around CZK 36 to CZK 37.

Subsequently, through more expensive transport and logistics, it is penetrating the prices of food, goods, and some services. Finally, there is the exchange rate channel and inflation expectations: if geopolitical tensions keep the dollar strong and companies and households begin to expect more expensive energy, the risk of secondary inflationary effects increases. This mechanism is noticeable for a small import-oriented economy such as Czechia. The important thing, however, is that this is not yet a shock comparable to the energy crisis of 2022. Even Reuters points out that although current prices are significantly higher than at the beginning of the year, they are still not extreme in historical comparison with recent years. In other words, if the situation calms down within a few days or weeks, the impact on Czech inflation will be rather temporary. However, if the restrictions on transport through Hormuz last longer, oil could settle at a higher level and the pro-inflationary risk would become a relevant issue for the CNB's interest rate decisions.