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Nine central banks across developed and emerging economies, including the US Federal Reserve, European Central Bank (ECB), Bank of England, Bank of Japan and Bank Indonesia, will meet this week. The world economy has changed since the last time they met their respective teams.

The Middle East conflict has sent energy prices soaring, making their job of re-anchoring inflation expectations and managing growth trickier.

Brent crude has risen 68% so far in 2026 to $102 a barrel. The war is creating the largest supply disruption in the history of the global oil market, said International Energy Agency (IEA) last week. It has lowered its 2026 oil supply growth forecast to 1.1 million barrels per day (mbpd), down from 2.4 mbpd. The extent of losses will depend on the duration of the conflict and disruptions to flows.

IEA projects global oil supply to plunge by 8 mbpd in March. With that, an old nemesis of central banks may return: elevated inflation and muted economic growth. Every 10% rise in oil prices that persists for a year leads to 40 basis point growth in global headline inflation and a 0.1–0.2% decline in global output, estimates the IMF.

Higher energy prices feed into transport and food costs, pressurizing household budgets. For companies, production costs surge. Country-specific impacts would vary depending on twin deficits, forex reserves and import dependency.

Asian economies, which were already grappling with the US tariff impact, are seen bearing a severe brunt. Asia is a large net energy importer, and a significant share of its oil, gas and fertilizer imports pass through the Strait of Hormuz.

“Thailand, Korea and India appear the most vulnerable,” said Nomura Global Market Research report dated 11 March. Rising energy costs are pushing up pipeline price pressure and inflation is likely to rise from current low levels, said Nomura. For now, it expects most Asian central banks to stay on hold, but the bar to hike is also high.

Central banks will have to tread carefully. Cutting rates too soon could prompt capital outflows from emerging economies, hurting their currencies. Aggressive tightening can hurt the already weak growth prospects.

In developed world, Europe is highly dependent on oil and gas imports. Nomura expects the ECB to leave its deposit rate at 2% this year and next, but rising price pressures may necessitate an earlier rate rise.

In contrast, net energy exporter US is seen as largely insulated. Nomura expects no rate cuts under chairman Jerome Powell and easing may resume in June under a new chairman.

In the 2022 energy shock (Russia’s invasion of Ukraine), central banks in the developed world had tightened faster to return policy-neutral levels. In a note dated 13 March, Neil Shearing, group chief economist at Capital Economics, said at that time they were caught on the back foot, but that is no longer the case. So, they would need clear deterioration in inflation expectations or wage trends to justify a renewed tightening cycle.

“But if the conflict proves short-lived, central banks may ultimately conclude that the best course of action is simply to stand pat for now,” he added.

Meanwhile, India’s retail inflation firmed up to 3.21% in February, higher-than-anticipated but within the Reserve Bank of India’s (RBI) 4% threshold. Crude oil volatility and El Nino fears playing out would eventually show up in inflation. RBI is widely expected to be on a prolonged pause while maintaining adequate liquidity in the system.

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