Two weeks into the U.S.-Israel-Iran conflict, markets view it as a lasting structural threat to the global economy, not a brief flare-up.

U.S. strikes on Iran’s key oil hub at Kharg Island sparked fears of crippled Persian Gulf crude exports. Oil prices surged past $100/barrel as traders priced in tight supply and retaliation risks.

The central worry is disruption in the Strait of Hormuz, a vital chokepoint for global oil flows, prompting talk of coordinated releases from strategic reserves.

This unfolds as four major central banks — the Reserve Bank of Australia, Bank of Canada, U.S. Federal Reserve, and European Central Bank — meet this week, forced to balance resurgent energy-driven inflation against the risk that tighter policy in a geopolitical crisis could choke global growth.

China’s industrial production rose 6.3% versus 5.3% expected, pointing to a manufacturing rebound after a weak start to the year.

Stronger activity supports domestic equities, but it also implies higher demand for energy and raw materials just as Middle East tensions are tightening global supply. Growth is therefore a tailwind for risk assets, even as rising Chinese energy needs risk adding further pressure to already volatile commodity prices.

The Reserve Bank of Australia is expected to raise rates from 3.85% to 4.10%, with Governor Michele Bullock warning that inflation pressures remain uncomfortably persistent. The latest data have done little to ease those concerns.

What makes this meeting crucial is its timing. With oil prices surging amid geopolitical tensions, the RBA may be the first major central bank this week to spell out how higher energy costs could shape the inflation outlook.

Its statement tone could set the benchmark for how other central banks choose to frame the geopolitical shock in their own decisions.

Bank of Canada: Expected to keep rates on hold at 2.25%. The real focus will be on its guidance rather than the decision itself.

Canada sits in a peculiar spot during energy shocks: higher oil prices boost export revenues but still filter through to domestic inflation. If policymakers emphasize inflation risks from rising oil, markets may read the message as modestly hawkish, even with an unchanged policy rate.

US Federal Reserve: Expected to hold rates steady at 3.75%. Officials have signaled the current stance fits as they track a modest inflation uptick.

Surging oil prices complicate matters, rapidly feeding into transportation, production, and consumer costs. In the press conference, Chair Jerome Powell will face questions on whether the war-driven energy shock could upend the Fed’s inflation path. Any signal of concern over reignited pressures from higher oil could convince markets that easing remains off the table for now.

Bank of Japan: Expected to hold rates at 0.75%. Officials signal a measured shift from ultra-loose policy, insisting sustainable wage growth must back inflation before further tightening.

Rising oil prices pose a sharp challenge. Japan imports most of its energy, so sustained crude surges could drive imported inflation higher, testing the central bank’s cautious path.

ECB: Expected to keep rates steady at 2.15%.

Until recently the ECB had maintained a relatively comfortable stance, arguing that inflation was gradually moderating across the Eurozone. But the recent surge in oil prices has introduced a new variable. Energy costs remain one of the most volatile drivers of European inflation. If policymakers acknowledge the geopolitical risks in their statement, it may signal that the ECB is becoming less comfortable discussing rate cuts in the near term.

Germany’s Producer Price Index is expected to rebound to 0.3% from -0.6%.

This sharp turnaround signals upstream price pressures returning in Europe’s largest economy. Producer prices often lead consumer inflation, especially amid rising energy costs.

Confirmation of renewed pressures could cement fears that Eurozone inflation will creep higher in coming months.

This week could be a turning point for markets. Geopolitical tensions between Iran, the United States, and Israel stay elevated amid one of the densest central bank decision weeks in months. The danger lies in their collision.

Higher oil prices threaten to reawaken inflation just as central banks thought they were bringing it under control, while equity markets — especially growth stocks — are already wobbling as rate expectations shift.

If conflict worsens and energy costs persist, policymakers face a grim choice: tolerate inflation or tighten into a brittle global economy. For markets, volatility is certain; the question is how fast investors reprice the harsh new reality.