Markets fret over growth and inflation despite easing oil prices

Global markets remain concerned about weak growth and persistent inflation, despite oil prices falling as hopes grow for de-escalation in the Iran war. The combination of elevated energy costs, tighter financial conditions and doubts about the AI boom raises the risk that prices stay high while economic activity slows.

Oil dropped nearly 20 per cent this week to below US$100 a barrel, but is still up almost 60 per cent this year; natural gas costs nearly three times as much as at the start of 2026. US one-year inflation expectations rose to 4.7 per cent in October, while long-term expectations remain above 2 per cent in the euro zone and US and above 3 per cent in Britain. Borrowing costs also rose sharply in the third quarter, and the European Central Bank estimated higher bond yields could reduce growth in 2027-28 by a cumulative 100 basis points against its September projections.