Oil markets ended last week in dramatic fashion. Brent crude futures have now risen more than a third since the last day of February, trading above $113 a barrel on Friday, while the physical price of oil delivered from Middle Eastern sellers has surged even further. The cause is the same one that has dominated every trading session this month: the Strait of Hormuz.

Iran’s closure of the strait has disrupted roughly 20% of global oil supplies and significant volumes of liquefied natural gas. Oil industry executives and analysts are increasingly warning that if the waterway is not reopened by mid-April, the fallout could escalate sharply – with stopgap measures such as strategic reserve releases losing their effectiveness in the weeks ahead. The International Energy Agency has acknowledged that even its largest ever reserve release of 400 million barrels can only compensate for a matter of weeks of disruption.

For currencies, the energy shock is now doing most of the heavy lifting — and it is reshaping the rate-cut story that dominated financial markets just a month ago. The Bank of England, European Central Bank and US Federal Reserve all kept rates on hold, stating that the war had made the economic outlook more uncertain, creating upside risks for inflation and downside risks for growth.

So all three major central banks are now on hold — and the direction of travel for rate cuts has gone into reverse. Markets have scaled back expectations for rate reductions in 2026, with growing speculation about one or two rate rises from the ECB this year as higher energy prices threaten to push eurozone inflation back above target. In the UK, higher energy prices are expected to push consumer price inflation to between 3% and 3.5% over the next few quarters.

The damage to growth, unemployment and inflation has not shown up in the data yet, but will almost certainly do so in the next couple of months.

For the week ahead, the calendar brings its own tests. Tuesday sees the eurozone’s flash inflation estimate for March alongside the UK’s quarterly national accounts, while Wednesday brings US data including the ADP employment report and the manufacturing purchasing managers’ index (PMI) from the ISM. Good Friday falls at the end of the week, with European and US markets closed, meaning Thursday is effectively the last major trading session before markets shut for Easter. The oil price trajectory — and any signals from Washington or Tehran about the conflict’s duration — will set the tone for all of it.