Australia’s central bank is sounding the alarm on a problem no interest rate hike can fix. Chris Kent, Assistant Governor of the Reserve Bank of Australia, warned that the ongoing conflict in Iran, and the resulting disruption to energy supplies through the Strait of Hormuz, could push inflation meaningfully higher and force central banks into an uncomfortable corner.
The message is straightforward but grim: supply shocks are coming, they’ll raise prices, and monetary policy has limited tools to deal with them directly. The best central banks can do, Kent argued, is keep long-term inflation expectations anchored, even if that means tightening into economic weakness.
The numbers tell the story
The Iran conflict has knocked roughly 10 million barrels per day off global oil supply, a figure large enough to reshape energy markets worldwide.
The World Bank projected a 24% surge in energy prices for 2026. That would mark the steepest annual increase since the 2022 Ukraine invasion sent commodity markets into a frenzy.
