Oil prices are speaking.

Ask AI · Why is this oil-price shock different from the historical effects of stagflation?

【Preview Economy: April】

The road is long and hard.

Overseas, the probability that the conflict between the U.S. and Iran escalates remains relatively high, and the Middle East strait’s navigation may be difficult to achieve in the short term. Compared with the past “stagflation” effects, this oil-price shock is currently reflected more in a rise in inflation expectations, while its impact on economic growth is still limited. Recent PMI data from multiple countries has provided evidence for this, but the subsequent narrative depends heavily on the outlook for geopolitical conflict. Due to the impact of the Chinese New Year earlier in the year, my country’s year-on-year export readings may experience a temporary pullback; afterward, they are expected to remain at a high level.

On the domestic demand side, consumption in categories supported by “trade-in for upgrades” subsidies shows a broadly slowing trend, and the year-on-year growth rate of parcel delivery volume is clearly slower than last year. The adjustment to the fuel surcharge in this round is the largest in the past. Demand such as civil aviation may be affected. The growth rate of personal housing loans has fallen to the lowest level in history. Indicators such as the operating rates of oil and asphalt plants have again retreated to low levels, and infrastructure investment may be hard to sustain the year-opening burst. The relatively high level of export optimism will still drive industrial production in my country.

In terms of prices, compared with real-world measures in neighboring economies such as vehicle restrictions and working from home, the impact of high oil prices on my country is temporarily controllable, but it is still difficult to be entirely insulated. Although AI demand still has room for non-linear growth, high oil prices’ constraints on the global economy and monetary policy will, in the short term, suppress price performance such as that of non-ferrous metals. Based on a supply shock and a low base effect, my country’s price level will rise significantly, but it is not a broad improvement in corporate profits.

On the policy front, the “above-expectation” strength of external demand since the start of the year often implies a relatively cautious stance in domestic counter-cyclical measures. Combined with the extremely high uncertainty of geopolitical conflict, macro aggregate policy may enter a “observation period” in the short term. Recently, the pace and scale of fiscal debt issuance have been relatively steady and calm. Historically, the “stagflation” effects brought about by supply shocks have also largely corresponded to the dilemma faced by monetary policy. Accordingly, industrial policies such as “anti-involution” may also move forward in a more gradual fashion in terms of timing.

Fig. Oil-price shock—this time, different?

Source: WIND, author’s calculations

Note: Oil prices are indexed using the point in time when the conflict broke out as the base period.

**** Risk Warning: **** Geopolitical risk is beyond expectations.

【Author】

**** Wu Ge ****: PhD, Chief Economist at Changjiang Securities. He previously worked for a long time in the People’s Central Bank’s monetary policy department, and also served as an economist at the International Monetary Fund. Winner of the Sun Yifang Economics Science Award, recipient of the Pushan Policy Research Award and the Liu Shibai Economics Award; champion of the YUANJIAN Cup economics forecasting competition.

******** Xu Jinzhi, **** Yu Tao, **** Gao Tong ********: Research analyst(s) at Changjiang Securities.

【Recent Research】

1.Can’t stop the price?, March 26, 2026

2.Besides high oil prices, March 17, 2026

3.Who kick-started the cycle?, February 25, 2026

4.Where do residents’ deposits go?, January 28, 2026