Oil Shock Is Adding Stress to the Global Economy

Five things you need to know

• Saudi Arabia raised the price of its main oil grade to Asia to a record high premium. Still, it was about half the level anticipated in a survey compiled by Bloomberg, with this month hard to gauge given market volatility.
• US stock futures rose in early trading. Investors were focused on an Axios report that the US, Iran and a group of regional mediators are discussing terms for a potential 45-day ceasefire. Trading was thin, with markets in Europe and Asia still closed.
• President Donald Trump is planning a news conference at 1 p.m. Washington on Monday. Over the weekend, he issued increasingly aggressive threats to destroy Iran’s power plants and bring “Hell” to the country.
• The Indian rupee extended its biggest rally in 12 years after the central bank doubled down on curbing speculation against the local currency.
• Hedge funds have turned net bullish on wheat for the first time in nearly four years, betting on higher prices driven by dry weather in the US and a shortage of fertilizer and fuel.

Energy squeeze

Oil markets have been pitched into turmoil by the war in Iran, and the effects will likely be long lasting and far reaching.

After a meeting on Sunday, OPEC+ warned that the damage to Middle East energy assets will have a prolonged impact on oil supply even after the conflict ends. And with US inflation data coming out later this week, the sudden increase in gasoline prices felt by American consumers is set to be on full display.

Economists are penciling in a 1% increase in the consumer price index for March — the sharpest one-month advance since 2022 — after the Iran war pushed gas prices at the pump up by about $1 per gallon.

Gasoline-Derived US Inflation Surge in March

Higher prices at the pump seen fueling advance; core inflation more modest

As the war grinds on, there are signs of acute concern about near-term supply. Brent’s prompt spread — the difference between its two nearest contracts — ballooned above $10 a barrel in backwardation, a bullish pattern. That’s the widest since the conflict began, and tops peaks in 2022 after Russia invaded Ukraine.

Ahead of the Easter weekend, there were also signs of physical-market tightness. Dated Brent — the world’s most important price for real-world barrels — surged above $140 to the highest since 2008.

The spike in fuel costs is hitting low-cost airlines particularly hard. Malaysian carrier AirAsia X said it hiked airfares by as much as 40% and cut back on flights.

Its shares have fallen 41% since the war began, making it the worst performer in a Bloomberg index of global airlines. —Yongchang Chin, Vince Golle and Anuradha Raghu