
Global: IMF flags rising risk of stagflation. With Brent crude prices holding mostly below USD100/bbl over the past week, markets are now pricing in a diplomatic resolution between the US and Iran amid reports of ongoing talks. Despite the failure of the first round of talks in Islamabad, President Trump announced a drastic policy shift by ordering US Navy to begin blockading the Strait of Hormuz, interdicting vessels in international waters that have paid a toll to Iran for safe passage in the Strait. This move has strengthened the resolve of EU nations and China to push for a diplomatic solution. Concurrently, markets are now signalling that a resumption of talks is the better path for US policymakers to pursue.
The International Monetary Fund’s (IMF) latest World Economic Outlook, released on 14 Apr, flagged rising global stagflation risks from energy shocks and framed the outlook through growth and inflation scenarios. In the ‘reference’ case of a short-lived conflict, the global growth forecast has been revised down to 3.1% y/y in 2026 from a pre-conflict estimate of 3.4%, while the headline inflation forecast was raised to 4.4% from 3.9%. The IMF Chief Economist cautioned that an ‘adverse’ case is increasingly plausible: a larger and more persistent oil-price spike (leading to average oil prices of USD100/bbl in 2026; USD75/bbl in 2027) would drag 2026 growth down to 2.5% and lift inflation to 5.4%. In a ‘severe’ scenario with greater damage on regional energy infrastructure (USD110/bbl in 2026; USD125/bbl in 2027), growth in 2026–27 could fall to c.2.0%, with inflation rising to c.6.0%.
Meanwhile, China’s cost-push inflation concerns appear somewhat overstated. March CPI and PPI prints remain relatively contained compared with those of other major economies. A diversified energy mix helps cushion cost pressures, with renewables and nuclear accounting for a larger share of energy consumption than oil.This relative resilience in energy supply should help support export performance. March’s weak trade data should be interpreted with caution, as base effects are distorting the signal. A late Lunar New Year in 2026 delayed the resumption of factory activity into March, while Mar 2025 exports were exceptionally strong due to front-loading ahead of the US ‘Liberation Day’ in April that year. High-frequency indicators such as port throughput (excluding oil and gas carriers) have remained broadly stable at around 60mn tonnes per day into April, suggesting that underlying trade momentum has not materially deteriorated.

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