Macquarie warns that the US-Iran war triggering a surge in oil prices will bring an "inflation shock"

Investing.com — Macquarie’s latest report shows that the US-Iran war has caused oil prices to surge and triggered widespread risk aversion, with global financial markets in turmoil. Analysts warn that this conflict is creating significant negative supply shocks, with Brent crude jumping over 7% in Monday morning trading, gold rising 2.0%, and investors selling risk assets to move into “hard assets.”

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This shock immediately affected global stock markets, with major European indices falling an average of over -2.0%. US stock index futures also declined more than -1% during early trading hours as traders scramble to assess the duration of hostilities.

Macquarie strategists Thierry Wizman and Gareth Berry note that even without actual destruction of production capacity, “stockpiling” behavior and soaring insurance costs are driving a strong inflation cycle. Insurance premiums passing through the Strait of Hormuz have increased by 25% to 100%.

Global Growth Divergence and Energy-Importing Countries

The report highlights a significant divergence in economic outlooks between oil-importing and oil-exporting countries. Historically, supply-driven oil price surges have led to sharp and sustained employment losses, especially in countries like Japan, China, and Europe that rely heavily on Persian Gulf supplies. India is marked as “particularly vulnerable” because 85% of its oil imports depend on the region.

The US may experience a severe but short-lived GDP decline, while countries with substantial reserves and export capacity, such as Brazil, Canada, and Norway, despite inflation pressures, are expected to maintain strong output.

Macquarie warns that even the US will not be immune to a prolonged slowdown. Analysts compare the current situation to the 1990-1991 Gulf War, noting that high oil prices could interact with existing “financial fragility,” such as excessive leverage in private credit and weak household sentiment, potentially triggering a real recession.

This “war-driven” inflation could lead the Federal Reserve to adopt a more hawkish stance than expected, despite political sensitivities around policy rates.

Geopolitical Risks and the Outlook for the US Dollar

Over the next five years, the trajectory of the US dollar (USD) will depend directly on the outcome of this military conflict. Historically, when the US demonstrates clear leadership, the dollar performs well; for example, after the Gulf War, the dollar appreciated in real terms for a decade. Conversely, during the “War on Terror” in the 2000s, the dollar struggled, lacking broad international support, and its real value declined over time.

While the USD is expected to temporarily strengthen in the first half of 2026 due to its safe-haven appeal, Macquarie is not optimistic about its long-term prospects. The report states that even if Iran successfully achieves a “regime change,” it could be seen as an affront to the rules-based global order, prompting reserve managers to continue reducing dollar exposure. The loss of global trust could accelerate the adoption of alternative mediums of exchange, especially the Chinese yuan (CNY), as the dollar faces ongoing risks of losing its reserve currency status.

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