BNP Paribas economist Helene Punchon compares the current surge in oil and gas prices linked to the war in Iran to the energy shock of 2022. She argues that weak demand and fewer supply constraints will limit inflationary pressures and damage to growth compared to 2022, while faster response from central banks and close monitoring of transmission periods will be key factors in containing the side effects.

 

Comparing Current Shocks with Expected Energy Shocks in 2022

Will the same causes lead to the same results? In other words, will the outbreak of war in Iran and the resulting sharp rise in oil and gas prices lead to an inflationary shock similar to the one we experienced in 2022? And will its negative impact on growth be similar to those caused by the war in Ukraine and the subsequent energy shock?

"Today, inflationary pressures are expected to be less severe, as demand is less dynamic and supply is less constrained. Therefore, conditions do not appear conducive to a significant spread of rising energy prices."

"However, this will need to be closely monitored because delayed contagion is important, and a return to normalcy will take time."

"Furthermore, central banks have learned from the inflationary shock of 2021–2023. They are prepared to respond more quickly to any spillovers, secondary effects, and any ripples between rising prices and inflation and wage expectations."

"We have selected a set of indicators to track the impact of this new energy shock, caused by the war in the Middle East, on activity and prices in the Eurozone, the United States, oil and gas markets and emerging countries, and to see how similar the current situation is to the situation in 2022 when the conflict in Ukraine broke out."