By: Vincent Deluard, Director - Global Macro Strategy
The global economy is navigating a series of overlapping supply shocks that are reshaping both inflation dynamics and growth expectations. The disruption in the Strait of Hormuz has amplified existing pressures, pushing energy and input costs higher across multiple sectors. While markets have shown resilience, the underlying structure of inflation is becoming more persistent rather than transitory. This shift raises the risk that what began as a supply shock could evolve into a broader stagflationary environment.
Vincent Deluard, Director of Global Macro Strategy at StoneX, has analyzed macroeconomic cycles shaped by inflation shocks and supply disruptions across global markets. His perspective is grounded in tracking how repeated shocks alter both policy responses and market expectations, particularly when inflation begins to shift from temporary to embedded.
The global economy is increasingly exhibiting the classic conditions associated with stagflation as supply constraints drive inflation while growth momentum weakens. Vincent Deluard emphasizes that "this is probably the biggest oil shock since the 1970s", highlighting the scale of disruption caused by the Strait of Hormuz closure. Higher energy and input costs are reducing discretionary spending, leading to demand destruction across sectors. Over time, this combination of persistent inflation and slowing consumption creates a structural drag on growth that central banks may struggle to offset.
Inflation expectations are beginning to shift as repeated global shocks erode confidence in the transitory narrative. Vincent Deluard notes that "this is the sixth or seventh inflationary shock in the past five years", underscoring how cumulative disruptions are embedding inflation into economic behavior. As a result, households and businesses are becoming more sensitive to price increases, reinforcing upward pressure on wages and costs. This dynamic increases the risk that inflation becomes self-sustaining, complicating policy responses and raising the likelihood of a prolonged stagflationary cycle.
The risk stems from supply shocks, particularly energy disruptions, that push inflation higher while reducing economic growth through demand destruction.
Repeated shocks are changing how businesses and consumers perceive inflation, making it more likely to persist rather than fade quickly.
Not fully, as market-based measures remain relatively stable even while households experience rising costs more directly.
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--- Written by Frédéric Guétin, StoneX TV Producer
--- Expert: Vincent Deluard, StoneX Director of Global Macro Strategy
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