Shipping flows through the Strait of Hormuz are now expected to reach around 10% to 15% of pre-conflict levels through June, with a return to normal flows unlikely to materialize until mid-2027, Westpac said in a market outlook report published May 8.
That compares with a previous forecast published in March for flows to hit around 20% of pre-conflict levels in May and June before recovering to normal by the close of this year.
"Our assumption of a more sustained period of disruption to shipping through the Strait means it will take longer for smaller Gulf producers, including Kuwait, that have faced some production 'shut ins' due to storage capacity constraints, to return to normal," the bank said.
Due to continued uncertainty over a resolution to the conflict, global monetary and fiscal arms are incorporating higher inflation, lower growth, and weaker labor markets into baseline forecasts. Central banks are navigating the crisis with extreme caution and finding it increasingly difficult to balance inflation and growth risks, according to the report.
Westpac said it continues to expect two additional rate hikes from the Australian central bank this year, but with a slightly later timing in August and September.
The bank also expects a rate hike in New Zealand in September as higher fuel prices will result in a sharp lift to consumer price index inflation over the coming months.
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