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Will the oil crisis bring inflation roaring back?
Last updated: 10 April 2026
The first quarter of 2026 has been defined by a series of bewildering global events that have fundamentally altered the economic landscape. From the sudden capture of Nicolas Maduro in January to the subsequent ‘supply chain warfare’ in the Middle East, the optimism that characterised the start of the year has been replaced by a more sombre reality.
For UK businesses, the most pressing concern is the resurgence of inflation. Following the closure of the Strait of Hormuz – described by the International Energy Agency as the largest supply disruption in history – oil and gas prices have surged. With headline inflation expected to top 3% by June, the Bank of England’s previous path of gradual rate cuts now looks increasingly uncertain.
Our latest Quarterly Forecast for April to June 2026 explores these themes in depth, providing the essential data and analysis you need to protect your bottom line and cashflow.
Uncertain inflation landscape
The conflict in the Middle East has not only increased input costs across industries but has also raised the spectre of stagflation. While the US remains a net exporter of gas and oil, providing a domestic buffer, the eurozone and UK are far more exposed.
In the eurozone, the European Central Bank has been forced away from its ‘wait and see’ stance. Markets are now pricing in ‘insurance hikes’ as early as April to contain energy-driven price pressures. Meanwhile, in the US, the Kevin Warsh era is set to begin at the Federal Reserve, bringing with it new questions about the independence of interest rate decisions and the long-term strength of the US dollar.
The widening gap in currency predictions
The volatility of the past few months has highlighted just how quickly expert assumptions can be upended. In our previous forecast, the pound dropped as low as 1.11 against the euro, a major miss that demonstrates the difficulty of second-guessing an irrational market.
Current bank predictions for the quarter ahead show a significant disparity, representing a substantial risk to unprotected budgets. For a business exchanging £1 million, the difference between the minimum and maximum forecast rates for Q2 2026 is:
- GBP/USD: A disparity of $90,000
- GBP/EUR: A disparity of €40,000
- EUR/USD: A disparity of $80,000
These figures illustrate that relying on forecasts alone is a dangerous strategy. The only true antidote to such uncertainty is certainty, achieved through proactive risk management and tailored treasury solutions.
Political tremors and the AI arms race
Beyond energy and interest rates, several domestic and technological factors are adding layers of complexity to the markets.
- UK Politics: The Gorton and Denton by-election saw a 26% swing to the Greens, signalling a splintering of the political spectrum ahead of May’s local elections. There is even growing speculation that Angela Rayner could be positioned to challenge for the leadership should Labour suffer a significant ‘drubbing’ in June.
- The AI Factor: Advances in AI are sending tremors through the markets. In February, a single research simulation predicting 10% unemployment due to AI integration caused sudden stock price falls for major firms like Uber and American Express.
- The ‘2008’ Comparison: Finance insiders are sounding the alarm over private credit and mid-market loans, where default rates hit 9% in 2025. Some analysts warn these could top 15% if AI disruption accelerates, drawing anxious comparisons to the 2008 financial crisis.
Secure your budget for the summer
The next three months will be critical for any business with international exposure.
Our Quarterly Forecast includes a detailed calendar of market-moving events, comprehensive data tables from leading banks including ANZ, JPMorgan and Societe Generale, and a special feature on the risks currently facing the capital markets.
Don’t leave your profit margins to chance in an unpredictable era. Download our report today for all you need to know to navigate the challenges of Q2.
To discuss a bespoke risk management strategy that fits your business, contact our treasury experts at info@smartcurrencybusiness or by calling us on 020 7898 0500.
