April inflation data to test markets amid Middle East energy crisis

Financial markets are preparing for a crucial round of April inflation data that could determine whether soaring energy prices linked to the Strait of Hormuz conflict will become a persistent driver of global price pressures, potentially pushing back expected interest rate reductions.

Energy shock already visible in March data

Geopolitical tensions from the US-Israeli war with Iran have disrupted maritime trade and sent oil and LNG prices sharply higher. The initial inflationary impact was already reflected in March figures, with the US consumer price index rising to 3.3% annually and monthly inflation hitting 0.9%, largely driven by energy costs. The eurozone saw annual inflation climb to 2.6% in March from 1.9% in February, while Japan’s rate rose to 1.5%. April data releases — including US figures on May 12, eurozone preliminary data on Thursday, and Japan’s on May 22 — will now reveal whether energy costs have seeped into core inflation.

Second-round effects could delay rate cuts

Kutay Gungor, director of investment research at Turkish participation bank Kuveyt Türk, said April figures will show whether supply security concerns cause temporary fluctuations or establish a new price equilibrium. “Persistently high shipping costs and geopolitical risk premiums may generate second-round effects, constraining pricing flexibility in the services sector,” he warned. He added that any further tightening could push rate cut expectations into the fourth quarter, narrowing central banks’ room for maneuver.

Central banks hold steady as outlook darkens

The Bank of Japan kept its rate at 0.75% on Tuesday but raised its 2026 core inflation forecast from 1.9% to 2.8%. The US Federal Reserve is expected to hold rates unchanged on Wednesday at Jerome Powell’s final meeting before his term ends May 15. The European Central Bank and Bank of England, both meeting Thursday, are also widely expected to stand pat. Analysts warn that entrenched energy-driven inflation could force the ECB to reconsider its rate-cut trajectory.