April Inflation Is a Test for Global Markets Amid Energy Price Surge

Fuel is one of the factors because it is used for various purposes. (Antara)

JAKARTA - The global market is waiting for April's inflation data. This figure will show whether the surge in energy prices due to the Strait of Hormuz crisis is only temporary, or is beginning to put broader pressure on the prices of goods and services.

As reported by Anadolu Agency, Wednesday, April 29, tensions in the Middle East have disrupted maritime trade and pushed energy prices sharply higher. The impact was initially seen in March's inflation data.

Now, investors' attention is on April data. US inflation data will be released on May 12. The eurozone's preliminary figure came out Thursday, while Japanese data is scheduled for May 22.

Director of Investment Research at Kuveyt Turk, Kutay Gungor, said April's data would be an important measure to see the impact of the Strait of Hormuz crisis on price behavior.

According to Gungor, the rise in core inflation can indicate whether supply concerns are just triggering temporary turmoil, or forming a new price point on commodities.

Gungor warned that a spike in energy prices could slow the process of reducing global inflation. High shipping costs and geopolitical risk premiums could also trigger knock-on effects, especially in the services sector.

"The potential tightening in April data will narrow the central bank's room for maneuver and encourage expectations of a rate cut in the fourth quarter," he said, quoted by Anadolu Agency.

Early signs of energy pressures were already apparent in March. US annual inflation rose to 3.3 percent, with monthly inflation of 0.9 percent, mainly driven by energy costs.

In the eurozone, annual inflation rose from 1.9 percent in February to 2.6 percent in March. Monthly inflation reached 1.3 percent, exceeding market expectations.

Core inflation in the eurozone was recorded at 2.3 percent on an annual basis and 0.8 percent on a monthly basis. The increase was mainly driven by the services and energy sectors.

Japan also recorded an increase. Its annual inflation rose to 1.5 percent in March.

The Bank of Japan on Tuesday kept its interest rate at 0.75 percent. However, the central bank raised its core inflation projection for 2026 from 1.9 percent to 2.8 percent.

Crude oil prices, which have risen due to the Middle East conflict, are expected to put pressure on Japanese corporate profits and household income. The impact has the potential to slow Japan's economic growth in 2026.

The U.S. Federal Reserve is scheduled to announce its latest policy decision on Wednesday. Interest rates are expected to remain unchanged. It is the last meeting led by Jerome Powell before his term ends on May 15.

The European Central Bank and the Bank of England will also announce decisions on Thursday. Both are expected to hold interest rates.

If energy-based inflation continues to settle, the central bank may be forced to reconsider the direction of interest rate cuts.