Inflation fears surge as oil crisis to be 'much worse' in April, says IEA head
Global energy markets were already on edge when Iran’s closure of the Strait of Hormuz turned a severe supply crunch into what the International Energy Agency (IEA) called the biggest disruption in oil-market history.
For mortgage professionals, the question is no longer whether energy would be a macro story, but how long elevated prices might keep bond yields and fixed mortgage rates pinned higher than borrowers expected.
IEA executive director Fatih Birol said the hit to oil supply in April is set to be dramatically worse than in March as flows through Hormuz, the conduit for roughly a fifth of global oil and liquefied natural gas trade, slowed to a trickle.
“The next month, April, will be much worse than March,” Birol said in an interview with the “In Good Company” podcast.
“The loss of oil in April will be twice the loss of oil in March. On top of that you have LNG and others.”
He said the shortage is already visible in refined products.
“The biggest problem today is the lack of jet fuel and diesel; these are the main challenges and we are seeing it already in Asia, but soon, in April, or maybe beginning of May, it will come to Europe,” Birol said.
Birol described the shock as deeper than the oil crises of 1973 and 1979 and the disruption following Russia’s 2022 invasion of Ukraine, pointing to an estimated 12 million barrels per day of supply already lost because of the war and the Hormuz blockade.
“We are heading towards a major, major disruption, and the biggest in history,” he said, adding that gas, petrochemicals, fertilizers and sulfur have also been hit.
The IEA’s 32 member countries already agreed to release a record 400 million barrels from emergency reserves, and Birol said further action is possible.
“If we think there is a need, we may well make a suggestion [to release more reserves],” he said.
Still, he stressed such moves could “only help to reduce the pain” rather than solve the crisis outright.
Broader implications for rates and housing
For Canadian borrowers, the risk is that persistent energy strength would slow the recent easing in inflation that underpinned expectations for a lengthy Bank of Canada rate hold and stable fixed mortgage costs.
Economists expect the policy rate to stay on hold through 2026 even as growth cools, with fixed-rate relief already constrained by geopolitical tensions and elevated global bond yields.
If energy-driven inflation stayed sticky, lenders and brokers would likely be advising clients to plan for less rate relief at renewal and to stress-test budgets against a scenario of higher-for-longer borrowing costs rather than a quick return to ultra-cheap money.
The immediate shock is in oil and gas, but for mortgage markets, geopolitical supply risks have re-emerged as a key driver of the rate path, and with it, of affordability.
Source CMP
By Liezel Once
