Rising energy prices are once again at the centre of global economic concerns. The ongoing conflict in the Middle East has pushed oil and gas prices sharply higher, prompting comparisons with the energy shock of 2022. But while the similarities are striking, the underlying dynamics and their implications for inflation and monetary policy are notably different.

Since late February, oil prices have climbed from around $70 to nearly $100 per barrel, while European gas prices have surged from €30 to roughly €50 per megawatt-hour. These increases, though significant, remain less dramatic than in 2022, when oil exceeded $120 per barrel and gas prices spiked above €300 following Russia’s invasion of Ukraine.

The current surge is largely driven by supply disruptions in the Middle East. Attacks on energy infrastructure and the blockade of the Strait of Hormuz (a critical route for global oil and liquefied natural gas) have created uncertainty in global markets. This has led to sharp price volatility, complicating economic forecasts and raising concerns about further escalation.

Despite these parallels, today’s situation differs from 2022 in two keyways. Firstly, the nature of the shock is more global. While the 2022 crisis was largely Europe-specific due to reduced Russian gas supplies, the current disruptions are affecting energy markets worldwide, particularly in Asia. Oil, rather than gas, is now the primary driver of rising costs, making this a more “classic” supply shock.

Secondly, the broader economic context has changed. In 2022, the global economy was rebounding slowly from the pandemic, with high demand, tight labour markets, and already rising core inflation. Today, growth has slowed, demand pressures have eased, and supply chains have largely normalized. This suggests that the inflationary impact of higher energy prices may be more limited this time.

Energy prices influence inflation through several channels. Directly, they raise the cost of fuel, gas, and electricity—key components of consumer price indices. Indirectly, they increase production and transportation costs for businesses, which may be passed on to consumers. However, this pass-through depends on economic conditions; in a weaker environment, firms often struggle to raise prices.

There is also the risk of so-called second-round effects. If workers expect higher inflation, they may demand higher wages, which in turn increases business costs and fuels further price rises. So far, however, long-term inflation expectations remain relatively stable, suggesting confidence that current price pressures will not spiral out of control.

For central banks, this creates a delicate balancing act. Supply shocks like rising energy prices tend to push inflation up while simultaneously weighing on economic growth. Raising interest rates can help contain inflation but may further slow the economy.

The European Central Bank currently has some room to maneuver, with its key interest rate around 2%, close to a neutral level. For now, policymakers are taking a cautious approach. As long as underlying inflation pressures such as wage growth and long-term expectations remain contained, there may be no need for aggressive rate hikes. However, the situation remains fluid. If energy price increases prove persistent and begin to feed more broadly into the economy, the ECB may need to act more decisively to maintain price stability.

In short, while today’s energy shock echoes that of 2022, its impact on inflation and monetary policy is likely to be more measured, at least for now. Much will depend on how the conflict evolves and whether rising energy costs become a temporary disruption or a lasting economic challenge.

References 

DeNederlandscheBank. (2026, April 17). Energy prices are rising: what does this mean for inflation and monetary policy? Retrieved from DeNederlandscheBank: https://www.dnb.nl/en/general-news/background-2026/energy-prices-are-rising-what-does-this-mean-for-inflation-and-monetary-policy/

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