Strategists at Bank of America found a dramatic correlation between interest rates and oil prices in the U.S., U.K. and Germany.
Interest rates could go ‘significantly higher’ if oil prices keep climbing — even if the Iran war ends soon
In short
Bank of America strategists issued the warning after examining global market trends. Their analysis identified a dramatic correlation between interest rates and energy costs across the United States, the United Kingdom, and Germany. Because of this connection, upward momentum in crude markets poses a persistent threat to central bank targets. Borrowing costs could face extended upward pressure regardless of how quickly geopolitical tensions subside.
Key points
- Energy price increases could trigger significant borrowing cost increases despite a swift…: Energy price increases could trigger significant borrowing cost increases despite a swift end to conflict.
- The link between interest rates and crude extends across several major Western economies.: The link between interest rates and crude extends across several major Western economies.
- Resolving the war involving Iran may not prevent borrowing rates from climbing further.: Resolving the war involving Iran may not prevent borrowing rates from climbing further.