In its latest global economic report, HSBC has raised its 2026 average Brent crude price forecast to $95 per barrel. The bank cautions that even if a US-Iran agreement is reached swiftly and the Strait of Hormuz reopens, the inflationary impact from the supply shock is now largely irreversible, compelling more central banks to implement interest rate hikes.
The report comes as the Strait of Hormuz has been closed for nearly 12 weeks due to the US-Iran conflict, with market pricing reflecting divergent views on the situation.
The S&P 500 in the US has reached a new all-time high, driven by broad-based earnings growth rather than being reliant solely on technology stocks.
However, a bond market sell-off is intensifying, with US and UK 10-year government bond yields climbing to multi-year highs.
**Economy Shows Resilience as Energy Prices Rapidly Pass Through to Consumers** HSBC notes that real economic activity data has surpassed expectations: strong US employment and business inventory figures in early 2026, robust UK Q1 GDP, and continued export growth in China for April—with inventory rebuilding being a key support.
Yet, global confidence indicators are declining. The prolonged closure of the Strait suggests the near-term outlook will worsen. Poorer regions—such as ASEAN, South Asia, and Africa—are already experiencing fuel rationing, crop abandonment, and early shop closures.
Energy price increases are rapidly passing through to end consumers. Between February and April alone, energy contributed over 1 percentage point to the CPI increase in major US and Eurozone economies. The impact in Southeast Asia has been far more severe—Thailand at 3.9 percentage points and the Philippines at 2.8 percentage points. Core inflation is also rising in the US, with airfares and rents being primary drivers. Food price pressures continue to build in the Philippines, Mexico, and India.
**Oil Price Revised to $95; Real Risks Lie Beyond Crude** HSBC has revised its 2026 average Brent crude price forecast upward by $15 to $95 per barrel. This revised baseline scenario, which assumes a gradual reopening of the Strait starting mid-June and normalization by the end of Q3, falls between the bank's previous "base" and "bad" case scenarios.
Natural gas prices, however, are better than expected, broadly aligning with HSBC's "good" scenario and providing some relief to fiscal pressures in Europe.
The report's core warning, however, is that risks extend far beyond crude oil. Shortages loom for refined products (jet fuel, diesel), fertilizers, sulfur, plastic feedstocks (naphtha, ethylene glycol), aluminum, and helium. Refined product inventories are lower and more vulnerable than crude oil stocks. The Middle East accounts for 15–20% of global exports for several key commodities.
Downstream effects will propagate along supply chains to industries like automotive, semiconductors, packaging, and food. Asia—particularly Thailand, Singapore, South Korea, and the Philippines—is most dependent on Middle Eastern supplies.
HSBC concludes, "Every additional day the Strait remains shut widens the range of affected commodities and oil-linked products, leaving businesses with little choice but to raise prices."
**Central Bank Hikes: A Matter of Credibility, Not Overreaction** Addressing questions about whether rate hikes are premature, HSBC points to the clear lesson from the delayed action in 2022. Analysts wrote in the report:
"A stitch in time saves nine—this is now about credibility."
Specifically, the bank expects the European Central Bank to hike rates by 25 basis points in June, July, and September (potentially only once if the Strait reopens immediately), with a possible reversal in 2027. The Bank of England and the Bank of Japan are likely to hike in June–July. Under the baseline scenario, the US Federal Reserve is expected to hold rates steady in 2026. However, risks of a hike within the year cannot be ignored under new Chair Kevin Warsh, compounded by supply shocks from tariffs and immigration policies. In emerging markets, the Philippines, India, Indonesia (in the second half), Poland, the Czech Republic, and South Africa are expected to hike further, with currency depreciation increasing the pressure to act. Australia and Norway may have already completed their current hiking cycles.
Overall, HSBC's assessment is hawkish and cautious: supply-side shocks are persistent and spread non-linearly, with Asia and Europe being more vulnerable than the US. The greatest uncertainty remains when the conflict will end—each day of delay increases the cost of that "stitch in time."
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