Energy shock hits outlook - Investment Clock economic update

The Iran conflict has injected a substantial amount of uncertainty into the outlook. Crudely, growth will be weaker than previously expected and inflation stronger. But the longer disruption persists, the more significant the impact will be on the global economy.

Central banks face trade-offs between managing inflation risks and further damaging the economy. They can look through a short-lived shock but, assuming prices remain well above levels seen at the start of the year, some (very) modest policy tightening seems likely. However, just as the situation in the Middle East is very uncertain, so are the forecasts as a result.

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