U.S. attacks on Iran are likely to keep oil prices elevated for some time (see Chart 2). This geopolitical component, together with the likely end of the downward cycle in international agricultural commodity prices, is expected to put upward pressure on inflation. As for iron ore, the start of operations at the Simandou mine—the world’s largest mining project, located in Guinea and led by Chinese state-owned consortia—has the potential to keep prices contained.
The U.S. attack on Iran now emerges as the main geopolitical risk factor. It is possible that, after a few weeks of conflict and higher oil prices, the situation will normalize. However, the risk has clearly increased, and the outlook must now incorporate a shock—albeit temporary—to global fuel prices.
