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Oil shock from Gulf war feeds inflation pressures, UBS says

UBS estimates energy’s direct share in consumer baskets is about 7% in the US and nearly 11% in the EU, but indirect costs like transport and delivery are material.

Reported · Written up by our desk · Energy

UBS economist Paul Donovan said oil price effects from the Gulf war are a key reason inflation remains above target across major economies, even though isolating war driven price moves from broader inflation trends is difficult.

Donovan noted that energy’s direct weight is relatively limited in household baskets, at just over 7% in the US and almost 11% in the EU, while energy also works indirectly through transport and production costs.

He added that analysts cannot rely only on crude oil moves because refined product pricing matters too. Since February, crude oil futures were up 26%, while US diesel prices were reported to be almost 50% higher.

UBS pointed to regional differences as well, saying China’s vehicle energy prices were up 5%, which suggests the oil costs embedded in US imports from China may be lower than oil costs embedded in US production, complicating the inflation pass through.

Latest closeWTI crude $81.19 ▼2.5%

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