The start of the Middle East conflict in early 2026 caused an unprecedented drop in global petroleum supply. In response, oil prices jumped—but not to unprecedentedly high levels. The U.S. oil sector was a key factor in moderating the shock. For one, its steady increases in drilling helped create a large oversupply in the global market before the conflict, making it less of a challenge to offset the drop in Middle East oil output. In addition, U.S. commercial and government inventories were rapidly drawn down, filling half the gap between global supply and demand in the second quarter by some estimates. Inventories, though, are a limited resource and U.S. stockpiles stopped falling in July. As a consequence, the continued shortfall in global production has been managed by running down inventories in the rest of the world.
NHListen
US economy remarkably resilient Growth has strengthened US facing unusual supply and demand shocks Remarkably stable and solid labour market We've seen tariffs effect work way through, mostly behind us Energy passing through to inflation as expected Inflation expectations well anchored Wage growth consistent with 2% goal This is appropriate time to gather more info New York Fed President John Williams highlighted the resilience of the US economy while signalling that the Federal Reserve can afford to take time to assess incoming data before making further policy decisions. Williams said economic growth has strengthened, describing the US economy as remarkably resilient despite facing unusual demand and supply-side shocks. He also characterised the labour market as remarkably stable and solid, suggesting that employment conditions remain broadly supportive of the economic outlook. On infl
ListenTranscript
The labs are becoming hyperscalers, imports are continuing to surge, and investment further up the supply chain is rising in response to the tight supply of GPUs and memory.
Governor Bailey warned that another 25 bps rate increase could be justified if the conflict in Iran does not come to an end. Bailey stressed that the UK needs to limit the inflationary impact of the conflict, particularly given that domestic inflation pressures were already elevated before the energy shock. However, he pushed back against suggestions that the BoE has acted too late, arguing that the latest decline in oil prices was encouraging but that policymakers cannot place too much weight on short-term developments without clear evidence of a genuine peace process. He also refused to commit to a "two and done" outlook for interest rates, highlighting the uncertainty surrounding the conflict and noting that he hopes to have greater clarity on its outcome by December. Bailey also addressed market pricing, noting that the upward shift in the interest rate curve partly reflects higher r
