Is the 'High Oil Price Shock' Triggered by the Middle East War Less Severe Than Expected? [Weekend Money]

U.S. Inflation Data for March More Stable Than Expected
Impact Could Diminish Further If War Ends Quickly

Amid soaring international oil prices due to the Middle East conflict, a gasoline and diesel price notice is placed at a gas station in Yongsan-gu, Seoul on April 3, 2026. Photo by Dongju Yoon

Although international oil prices have soared due to the Middle East war, analysts say the negative impact on the U.S. economy has been less severe than expected.

According to the report titled "Was the Shock of High Oil Prices on the U.S. Economy Overblown?" published by iM Securities on April 18, the impact of high oil prices on the U.S. economy remains limited so far.

Park Sanghyun, Senior Research Fellow at iM Securities, commented, "The surge in oil prices has led to a sharp rise in gasoline prices, negatively affecting U.S. household consumer sentiment. However, increased tax refunds compared to last year, as a result of the OBBBA Act (the tax cut law promoted by President Donald Trump), are supporting consumers' spending power."

It is also encouraging that inflation indicators have been more stable than expected. Not only did both the U.S. Consumer Price Index and Producer Price Index for March fall significantly below market expectations, but March's import price growth rate also came in well under forecasts. Import prices in March rose 0.8% from the previous month, much lower than the market expectation of 2.3%. In particular, import prices excluding petroleum increased only 0.1% in March after a 0.9% rise in February, again underperforming the market forecast of 0.3%. As a result, the year-on-year import price increase for March was 2.1% (compared to the market expectation of 4.4%), which has significantly reduced inflation risk.

Park noted, "While rising oil prices and disruptions in the energy supply chain could increase inflationary pressure in April with a time lag, the probability that inflationary pressure will remain lower than feared has also grown. Furthermore, if ceasefire negotiations between the U.S. and Iran are concluded within April, inflationary pressure could ease starting in May, meaning that concerns about inflation caused by high oil prices may only be temporary." He added, "This suggests that the inflation trend could differ from what was seen during the Russia-Ukraine war."

However, Park pointed out that not all U.S. economic indicators are positive. He explained, "Although the New York Empire State Manufacturing Index improved in April, the outlook index declined by 11.4 points, and the price index jumped from 36.6 in March to 51 in April, indicating that the burden of high oil prices is starting to become visible."

He also said, "Due to rising mortgage rates, the National Association of Home Builders (NAHB) Housing Market Index registered 34 in April, falling short of both the March figure of 38 and the market expectation of 37. This shows the impact of higher interest rates."

Park highlighted that the stabilization of interest rates and stock market trends are encouraging. "Despite the impact of high oil prices, Treasury yields have rapidly stabilized. The faster-than-expected stabilization of both short- and long-term Treasury yields has had a positive effect on funding markets and the overall economy," he said. He also noted that yields on AAA corporate bonds, which reflect corporate funding risk, are quickly returning to pre-war levels, which is another positive sign.

This content was produced with the assistance of AI translation services.