US-Iran agreement isn’t yet a game-changer for the global outlook
The recent US-Iran agreement aims to stabilize oil markets, but uncertainties and regional tensions may slow progress in shipping through the Strait of Hormuz.
The agreement between the US and Iran is a significant step towards reaching a full-blown deal. But there will likely be bumps in the road, and it will still take time for shipping in the Strait of Hormuz to approach pre-war levels. Though details are lacking, the fact that both sides announced an agreement reduces the tail risk of dwindling oil inventories prompting a recession-inducing oil price spike.
The latest developments don’t automatically point to a faster ramp-up in the amount of oil flowing through the Strait of Hormuz over the coming months compared with our June baseline. We already assumed shipping through the Strait would resume in late July.
While this will reduce headline inflation, we suspect the economic boost from this will be limited, and calendar year growth for 2026 is still likely to fall outside the 2.8% to 3.0% range of the past few years.
Overall, this reinforces our long-held view that the Federal Reserve and the Bank of England won’t hike rates and lessens the chance that central banks that have already raised interest rates, despite a weak economic backdrop, hike again.
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