Energy Price Increases Follow Strait of Hormuz Disruption

Oil and gas prices have risen following the closure of the Strait of Hormuz. The increase has led to higher costs for petroleum products such as diesel and for industrial inputs including sulphur and fertilisers. Producer price expectations have increased rapidly in energy-intensive sectors including chemicals, base metals, and wood.

European industrial surveys show strong repricing at the start of the production chain.

Further downstream, firms are adjusting prices but with less breadth and intensity than during the 2021–2022 inflation surge. The gap between rising price expectations and more modest realized price increases may indicate larger price hikes in coming months.

At the consumer level, inflation has responded mainly in energy and energy-related components. Headline CPI prints have matched or fallen below expectations while core inflation has remained contained.

Labor markets have cooled in several advanced economies.

U.S. payrolls growth and job openings have slowed. In the Eurozone, labor market tightness indicators have eased while unemployment remains near cyclical lows. In the UK, unemployment has returned to around 5 percent, vacancies have reached a five-year low, and wage growth continues to slow.

These conditions suggest increasing slack rather than an overheated economy. S. 67 percent, the highest level since mid-January 2025. S. 10-year Treasuries and German bunds has widened from 120 basis points on 13 April to nearly 150 basis points. The IMF has urged Britain to stay the fiscal course.

At this week’s G7 meeting, finance ministers and central bankers emphasized that any policy support should remain temporary, targeted, and fiscally responsible.