Romania, sure victim of the new energy shock. High interest rates and record inflation – the vicious circle that blocks rates from falling
The energy crisis has returned to the fore on the global stage, sending clear signals to markets, while central banks face a difficult task in deciding what to do with interest rates, as initial plans to cut them to boost economic growth now look unlikely.
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According to world trade data, nearly nine out of ten barrels of oil passing through the Strait of Hormuz are destined for Asia. China alone consumes almost 5 million barrels per day (about 38% of the total), followed by India, South Korea and Japan. In practice, between 84% and 89% of traffic passing through the strait is destined for Asian markets.
“Europe and the United States have only a marginal share. The United States imports about 0.7 million barrels per day via this route.”points out eToro analyst Bogdan Maioreanu, stating that Europe imports even less. Fthe catchphrase “20% of the world's oil” is therefore a global figure, not a Western one. The direct risk is primarily to Asia's energy security,” emphasizes the analyst.
Asked why petrol and diesel prices are rising everywhere, the analyst explained that there are several reasons. “Even if a country does not buy oil that passes through the Strait of Hormuz, oil is a global commodity. If 20% of the world's crude oil were to disappear, Asia would begin to compete fiercely with Europe to get hold of Libyan or Norwegian barrels, causing global prices to skyrocket. It's not about 'ships that don't arrive', it's about a global auction that risks suddenly becoming more expensive”explained Maioreanu.
Distributors raise prices anticipating how much the next shipment will cost
According to him, distributors do not set their prices based on the amount they paid for the oil already in their tanks (purchased months before the price explosion, when Brent crude was trading at a much lower level), but based on the cost they will incur to buy the next shipment. “If the price of Brent crude for May 2026 spikes, the price at the pump adjusts instantly to provide the company with the cash flow it needs for future purchases.
And, last but not least, there is an asymmetric effect, the “Rocket and Feather” effect, related to price elasticity. Fuel prices react like rockets to negative news – we saw the immediate spike when the Iran conflict started – and like feathers falling slowly to positive news”explained Maioreanu in his analysis of fuel price increases and the effects on economies.
The risk of stagflation is increasing. For Romania, the situation is even worse
While oil and gas companies are enjoying the current price situation, their evolution is more of a nightmare for central banks. The risk of stagflation is increasing.
“Higher energy prices could trigger inflation, slowing economic growth at the same time. For Romania, which already has the highest inflation in the European Union, this situation is even more problematic, as the country is also faced with the need to reduce its budget deficit”says Maioreanu.
Markets quickly adjust their expectations. In the US, investors now expect interest rates to be cut later and less aggressively. A single rate cut is currently forecast for 2026 in December, while none were forecast last week.
“This week, both the Federal Reserve and the European Central Bank will announce their latest interest rate decisions. Both central banks are likely to keep rates unchanged. The press conferences that will follow the decisions will be even more important. Previous monetary policy plans have largely been abandoned, and central banks must now steer their ship through dense fog. As a result of high oil prices, the tone of central bankers has will likely change, becoming more aggressive in maintaining or promoting higher interest rates. For Romania, this will not be new, as high and persistent inflation will most likely cause a pause in the key interest rate cut by the NBR”adds the analyst.
According to him, investors are trying to assess the situation in the Middle East as rising oil prices change the inflation picture and disrupt the narrative of monetary policy in recent months. “It is unclear how and when this Gulf conflict will end. The duration of the oil shock will be crucial for global economies. A short-term spike in oil prices can usually be absorbed. A prolonged energy crisis would be much more problematic. If prices remain above $100 a barrel for several months, pressure on inflation and economic growth would likely increase significantly. However, any signal that this conflict is coming to an end will have an impact immediately on commodity prices and financial markets, though the resumption of oil traffic through the Strait of Hormuz will not immediately lead to a normalization of the oil supply situation“explained the analyst.
