Inflation is already rising as a result of the oil shock. Interest rates will follow – especially if Trump shirks responsibility.
Apr 01, 2026, 05:36Apr 01, 2026, 05:36
Upwards. This has been the case with yields on government bonds since Donald Trump attacked Iran. As the International Monetary Fund notes: “Bond yields have risen in major industrialized countries and many emerging markets.” Switzerland fits into this trend. Yields on two-year government bonds have shot out of negative territory and those on ten-year government bonds have risen sharply.
Far away from the Persian Gulf, but the consequences can still be felt: houses in Etoy in the canton of Vaud.Image: KEYSTONE
Behind this trend is the energy shock that Trump triggered with his war. Iran has closed the Strait of Hormuz, which previously transported 20 percent of global oil supply. The International Energy Agency speaks of the biggest shock in the history of the modern oil industry. Thanks to a few countermeasures, the outage was reduced. Now it is no longer 20 percent of the previous global oil supply, but depending on estimates 6 to 13 percent. But even this smaller loss is still far greater than in previous oil crises. The shock waves go around the world.
Inflation in Germany was still 1.9 percent in February. In March it suddenly rose to 2.6 percent – mainly because energy prices had already increased by 7.2 percent. In France, annual inflation has almost doubled. A similar picture runs through the entire Eurozone. The annual inflation rate jumped from 1.9 percent in February to 2.5 percent in March. The EU Commission has already called on its member states to develop ideas for reducing oil and gas consumption, particularly in transport.
In India, there are long queues of people wanting to secure their cooking gas, as the New York Times reports. In South Korea, the government is encouraging citizens to take shorter showers. Sri Lanka is shortening the working week to reduce petrol consumption. In the Philippines, civil servants are now supposed to climb stairs instead of taking the elevator. In Egypt, shopping is only allowed five days a week.
Will he still find a way out? US President Donald Trump seems to have lost his way in Iran.Image: keystone
The crisis has only just begun, as representatives of the energy industry warn to “Bloomberg”. In conversations with retailers, managers, logisticians and consultants, they heard the same message again and again:
“The world still hasn’t understood the seriousness of the situation.”
The influential energy consultant Fereidun Fesharak also emphasized to “Bloomberg”: If the road remains closed for another six to eight weeks, the price of oil will rise to $200.
Gasoline price reaches symbolic mark
If that happens, inflation will become much stronger worldwide and central banks will have to take countermeasures. The financial markets anticipate this logic, as the bank J. Safra Sarasin traced in an analysis entitled “No time for complacency”.
In the USA, key interest rate cuts were recently expected – because the labor market has recently lost significant jobs and Trump has repeatedly called for lower key interest rates. However, the markets are now assuming that the US Federal Reserve will keep its key interest rates at a high 3.75 percent this year. The OECD country association is now even warning that the USA could soon experience inflation of over 4 percent again. The price of gasoline has already reached the symbolic mark of 4 dollars per gallon (3.8 liters) this week. This increases the risk that the Fed will soon have to raise its key interest rate.
A turnaround in interest rates is now expected for the Eurozone: The European Central Bank (ECB) will increase its key interest rates by 0.75 percentage points by the end of the year. ECB boss Christine Lagarde emphasized that one cannot rely on the energy price shock to subside on its own – without the ECB having to intervene.
And even for Switzerland, which recently had no inflation at all, the markets are now expecting at least an increase in key interest rates by the Swiss National Bank. The new future prospects are already driving up interest rates on long-term government bonds. Over time, this will also include mortgages. Banks are again charging more interest to grant mortgages.
The big question is how far this development will go. Is the next interest rate shock already imminent, like after Russia’s attack on Ukraine? At that time, the ECB and the Fed initially underestimated the rise in inflation and then increased their key interest rates even more quickly. They don’t want to repeat this mistake. In Switzerland, inflation rose to 3.5 percent at the time, and the National Bank raised its key interest rate early on to 1.75 percent.
More or less an impossibility
History does not have to repeat itself – even if the price of oil actually rises much more. The alternative isn’t much better. Major US financial institutions such as Pimco and JP Morgan are warning that the energy shock could lead to a global recession. Many central banks would be forced to support their economies with lower key interest rates – and interest rates on government bonds or mortgages would fall.
The decisive setting is the Persian Gulf. And because that is the case, the energy crisis will probably not be over any time soon. Trump cannot end the crisis on his own. Iran can fire missiles or drones at oil tankers crossing the Strait of Hormuz at any time. According to Trump’s former Defense Secretary James Mattis, preventing this is almost impossible.
Trump probably recognized this. That’s why he seems to want to shift the crisis that he himself caused onto others. He told the countries allied with the USA that were affected by the blockage that the USA would no longer help them: “Procure your own oil.” If Trump actually shirks responsibility in this way, then oil will become even more expensive than it is today, says oil expert Rory Johnston. “The only question is how much.” (aargauerzeitung.ch)