April inflation data to test global markets amid Middle East energy shocks

Financial markets are bracing for a wave of April inflation data that could determine whether rising energy prices tied to the Strait of Hormuz crisis will entrench global price pressures and delay anticipated rate cuts.

Geopolitical tensions stemming from the Middle East war have disrupted maritime trade and driven energy prices sharply higher. The initial inflationary shock from the US and Israel’s conflict with Iran was already reflected in March data, and economists are now closely watching April figures to assess whether oil and liquefied natural gas price increases have spilled into core inflation.

US inflation data for April is due May 12, preliminary eurozone figures are set for Thursday, and Japan’s data will be released May 22.

Kutay Gungor, director of investment research at Turkish participation bank Kuveyt Turk, said April data will serve as a key gauge of whether the Strait of Hormuz crisis has triggered structural shifts in pricing behavior.

“The upward momentum in headline inflation during this period may show whether supply security concerns will lead to temporary fluctuation or establish a new balance point in commodity prices,” he said, adding that surging energy prices could slow the global disinflation process.

He warned that persistently high shipping costs and geopolitical risk premiums may generate second-round effects, constraining pricing flexibility in the services sector.

“Any potential tightening in the April data is set to become the primary driver narrowing central banks’ room for maneuver in monetary policy, pushing back expectations of rate cuts to the fourth quarter,” he said. “The combined effect of cost-driven pressures with demand dynamics points to a risk of stickiness instead of a short-term shock extending throughout the year.”

Early signs of energy-driven inflation pressures were already evident in March data.

US consumer price index rose to 3.3% annually, marking an acceleration from the previous month, while monthly inflation reached 0.9%, driven largely by energy costs.

In the eurozone, annual inflation climbed to 2.6% in March from 1.9% in February, while monthly inflation stood at 1.3%, exceeding market expectations.

Core inflation in the eurozone was recorded at 2.3% year-on-year and 0.8% month-on-month, with services and energy leading the increase.

Japan’s annual inflation rose to 1.5% in March, also showing an upward trend.

Amid policy decisions, the Bank of Japan kept its interest rate at 0.75% Tuesday, while raising its 2026 core inflation forecast from 1.9% to 2.8%.

Rising crude oil prices linked to the Middle East conflict are expected to weigh on corporate profits and household incomes, potentially slowing Japan’s economic growth in 2026.

Meanwhile, the US Federal Reserve is set to announce its latest policy decision Wednesday, with expectations that rates will remain unchanged at the final meeting chaired by Jerome Powell before his term ends May 15.

Decisions by the European Central Bank and the Bank of England on Thursday are also in focus, with both institutions widely expected to hold rates steady.

Analysts warn that if energy-driven inflation becomes entrenched, it could force central banks, particularly the ECB, to reconsider their rate-cut trajectories.

*Writing by Emir Yildirim