
Asset management giant Apollo: The surge in oil prices after the Israel-Hamas conflict may exacerbate the impact of stagflation in the United States

Apollo Global Management pointed out that Israel's attack on Iran has led to a surge in oil prices, which may exacerbate the stagflation situation in the United States. A $10 increase in oil prices is expected to raise inflation by 0.4% and decrease GDP by 0.4%. The market expects the Federal Reserve to maintain interest rates at the upcoming meeting, but stagflation will become a tricky issue for the Federal Reserve
According to the Zhitong Finance APP, Apollo Global Management pointed out that oil prices surged after Israel launched an attack on Iran, and if this trend continues, it could exacerbate the stagflation situation in the United States.
Last week, Israel carried out airstrikes on Iran without U.S. support, triggering severe market turbulence, leading to a sharp rise in crude oil futures prices, a jump in gold futures, and a sharp decline in U.S. stock futures and Asia-Pacific stock markets. Last Friday, oil prices rose more than 7% in a single day, marking the largest single-day increase in three years.
Torsten Slock, Chief Economist at Apollo Global Management, stated: "According to the Federal Reserve's U.S. economic model, a sustained increase in oil prices by $10 is expected to raise inflation by 0.4% (including secondary effects) and reduce GDP by 0.4%."
Currently, West Texas Intermediate (WTI) crude oil has risen more than $10 from its low point at the end of May.
He further pointed out: "Tariffs will also push up inflation and suppress GDP growth, while immigration restrictions will exacerbate wage inflation and drag down employment growth. In short, high oil prices intensify the persistent stagflation shock caused by tariffs and immigration restrictions."
This week, the market expects Federal Reserve Chairman Jerome Powell and his colleagues to maintain the benchmark interest rate at the June 17-18 meeting. As of last Friday, trading pricing indicated an approximately 80% probability of a rate cut in September.
Slock said: "Stagflation will become a tricky issue at the Federal Open Market Committee (FOMC) meeting—rising inflation suggests the Fed should raise interest rates, while slowing GDP growth points to a rate cut. So, will the FOMC meeting place more emphasis on the upward pressure of inflation or the impending slowdown in growth?"