Inflation or demand destruction?
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How is the ongoing Middle‑East conflict influencing oil prices and inflation expectations?
When the war started, sorry, the special military operation. When it began, uh the big concern was the spike in oil prices and what that would do to inflation. As the special military operation continues and worsens, will markets be more concerned about falling demand than rising prices? Is growth going to be the biggest casualty? And our markets starting to adjust to that. It's Monday. It's the 30th of March, 2026. It's the morning call from NAB. Morning. Well, oil is edging up further, up another five and a half percent for WTI on Friday, up four point two percent for Brent, which finished the week just below a hundred and thirteen a barrel. We saw falls in shares, one point seven percent off the S P on Friday, two point one percent off the Nasdaq.
The DAX finished Friday down one point four percent, only a slightly smaller move, uh lower for the ASX two hundred, and smaller moves than we've been seeing for Bonds as well. So ten year treasury yields rose two basis points on Friday up to four point four four percent. Remembering of course that it started the month just above four percent. Yields moved just two or three basis points higher in much of Europe, but Aussie ten years were up nine basis points on Friday, up above five point one percent now. That is about thirty-six basis points higher than the start of the month. Uh the US dollar is up a quarter percent and now over a hundred on the
What does the latest University of Michigan consumer‑sentiment survey reveal about inflation fears?
DXY. The Aussie was down about 0.2% to 68.7 US cents. The Euro losing a similar amount. The yen down 0.3%. The pound is down half a percent. So one month on. No sign of the war in the Middle East lessening. Netanyahu has stepped up his uh drive for military control of southern Lebanon. The 31st Marine Expeditionary Unit is now in the Middle East. From the US and ready for action on the ground if Donald Trump decides that he wants to do well, that's what he wants to do. But we don't know what's happening in terms of peace talks. Pakistan has said that they are facilitating them, or they will, but no word as to whether they're actually taking place or not. Nab Sky Masters is with me. So bond markets seem to assume higher inflation.
But what if instead we see more demand destruction and so the inflation stays in check? I mean that's That's the fundamental question, isn't it, for investors right now? Which way do you go?
Are investors shifting from inflation worries to concerns about demand destruction?
Yes, good morning, Phil. And it definitely is the the big um question for investors. And I think that started to feed through uh into price action on on Friday. So, you know, as you hit the fifth week of the conflict um with with all news that really it seems to be escalating rather than de-escalating, it is leaving a very challenging landscape for for investors. To navigate. And I think the initial response and the right response was the fear of higher inflation. You know, you are going to get that immediate hit. You saw that in sort of the final read of the University of Michigan Consumer Sentiment Report, which was released on Friday. And it did show that while sentiment did fall to a three-month low, one-year inflation exhibit.
Expectations were revised up so from 3.6 to 3.88%. So fear of immediate impact of inflation is, as I said, is the right way to price in what's currently going on. But what is starting to feed through, as I said, into investor sentiment is what happens in the in the more longer term or medium term if this conflict is here for s for some time, which it seems to be and interestingly that consumer sentiment um inflation expectations report uh while the one year inflation expectations rose the medium term one was was unchanged at three point two um and I think sort of what we're seeing is in investors looking at the demand destruction as you said and we can dig into it but I think that fed into investor price action in bonds on Friday.
Yeah,
we'll look at that in a second. Just on that University of Michigan survey, so it was interesting because also obviously consumer sentiment was lower as well. In fact, the lowest m just for the year so far. We're not far into the year.
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Chapters
8 chapters
1
How is the ongoing Middle‑East conflict influencing oil prices and inflation expectations?
0:01–1:19
2
What does the latest University of Michigan consumer‑sentiment survey reveal about inflation fears?
1:19–2:13
3
Are investors shifting from inflation worries to concerns about demand destruction?
2:13–4:06
4
How are bond yields and the yield curve reacting to the war‑driven market uncertainty?
4:06–5:48
5
What impact could Houthi activity in the Red Sea have on global oil supply and prices?
5:48–7:41
6
Which upcoming data releases (US payrolls, Eurozone CPI, NZ jobs) could tip the market this week?
7:41–9:43
7
How are central banks (ECB, BoE, Fed) responding to inflation and growth risks amid the conflict?
9:43–11:43
8
What are the key takeaways for investors navigating inflation versus demand‑destruction scenarios?
11:43–13:01