Susannah Streeter, chief investment strategist at Wealth Club, said: “Stagflation fears are stalking financial markets as the war with Iran looks increasingly intractable and high energy prices look set to be the burden to bear for the global economy.
“London’s Footsie has scuttled lower in early trade as worries reverberate about the impact of the conflict.
“Banks are leading the descent, with Barclays, Lloyds and NatWest sinking into the red.
“Higher inflation and a stagnating economy are increasing the risk of loan defaults and weaker borrowing demand, which look set to eat into profitability.
“Energy prices are marching higher again, with Brent crude back up above $106 a barrel.
“Nerves are frayed once more, with worries rising that a resumption of strikes on Iran could be on the cards after President Donald Trump said the US-Iran ceasefire was on “massive life support”.
“Both sides have dismissed each other’s proposals and there are fears the stalemate could escalate again.
“It’s becoming clear that higher energy prices are here to stay for many months, potentially into next year.
“Even if the chokehold on the Strait of Hormuz is released, bruised supply chains and broken energy infrastructure will take many months, if not years, to heal.
“So, nations are settling in for the long haul and some of the contingency measures already brought in are helping ease immediate crises.
“There’s been a 10.1 per cent drop in the IATA jet fuel benchmark for the week ending May 1, indicating that some of the immediate market fears around supply disruption may be easing, at least for now.
“The closure of the Strait of Hormuz triggered emergency plans, with European and UK refineries switching to ‘max jet mode’, prioritising fuel production for the airline industry over other refined products.
“This, in addition to increased shipments from the US Gulf Coast and exporters such as Nigeria, is easing worries of an immediate fuel shortage crisis.
“This should reassure travellers holding off on booking, fearful of waves of cancellations.
“However, prices still remain around 60 per cent higher than before the conflict began, which will continue to keep airlines under intense cost pressures.”
Contact details are available to account holders.
Create a free account to get in touch with this expert.