Every atomic assertion extracted from the underlying record, ranked by evidence strength.
With the Strait of Hormuz taking longer to re-open, the period of severe energy disruption has been extended into Q3.
In the Eurozone, the annual average inflation forecast was raised by 0.2 percentage points in 2026.
Advanced economies are expected to avoid physical energy shortages and dodge recession in the base case.
The base case sees the European Central Bank hiking twice over the June and July meetings.
The main risk is that a deal between Iran and the United States to restart energy flows through Hormuz collapses, and that flows fail to meaningfully resume.
Even with a full reopening of the Strait of Hormuz, it will take time for energy flows to normalise.
Energy infrastructure will take time to be fully up and running again.
Demand is likely to continue to outstrip supply for many months yet as depleted inventories are refilled.
A prolonged tight energy market is likely to reassert itself and keep prices well above pre-war levels probably at least until the end of the year.
The longer the Hormuz standoff drags on, the higher the risk that inventories hit critical levels that trigger more severe energy shortages.
The global economy shows remarkable flexibility and resilience to respond to price signals and adapt to what the International Energy Agency has called the worst energy shock in history.
Inflation is expected to stay higher for longer.
The base scenario originally set out in March ('It takes three to TACO') assumed severe energy disruptions would last until the end of May.
The original base scenario projected Brent averaging USD 100 per barrel in Q2 and declining thereafter to average USD 86 for the year as a whole.
Both the Q2 average and the 2026 average Brent price forecasts have been raised by USD 10.
An agreement that leads to a re-opening of the Strait of Hormuz is assumed in the next few weeks.
The period of disruption would in any case sustain well into Q3, for a number of reasons.
The re-opening of the Strait of Hormuz might be gradual at first, with shippers and insurers likely to be cautious.
Oil production will take time to normalise, as up to a third of wells are shut in, and a significant number of them will take months to be fully up and running again.
There has been considerable damage to energy and shipping infrastructure, especially to LNG and refining facilities.
Inventories have been run down sharply, and there will likely be eagerness to restore these given that any deal could prove initially fragile.
All these factors occur against the backdrop of peak summer demand.
While energy prices are currently falling, prices are expected to bounce back again given that the supply relative to demand is likely to remain tight probably at least for the remainder of the year.
Continued elevated oil and gas prices also means that inflation is expected to stay higher for somewhat longer.
Eurozone inflation is now expected to stay well above the European Central Bank's target until next March.
For the United States, the quarterly inflation profile has increased by about 0.1 percentage points over 2026.
This confirms a picture of elevated inflation beyond 2027 for the United States.
Growth forecasts are kept broadly unchanged from the outset of the conflict, despite raised inflation forecasts.
The hit to real incomes from higher energy prices is weighing on consumption.
The real income shock is far smaller than what was observed among European households in the 2022-23 energy shock.
The smaller shock is being cushioned by government support measures in some countries.
Eurozone growth is expected to stay below trend over the coming quarters.
Tailwinds for Eurozone growth include Germany's defence spending drive and recovery fund spending in southern Europe ahead of the September cutoff for disbursements.
United States growth is expected to hold around trend.
Hits to United States consumption are offset by the ongoing AI investment boom, as well as some stimulus to the oil & gas sector and higher energy exports.
The economic fallout from the energy shock is remarkably contained despite being called 'the mother of all supply shocks' and 'the worst energy shock ever'.
The chief reason for contained fallout is myriad offsets to Hormuz energy flow disruptions.
A surprise jump in United States exports is a significant change from previous assessments of offsets.
Non-OPEC producers were previously thought unable to raise exports much, but the United States and other countries have exported considerably more.
Increased exports were partly achieved by running down inventories.
A sharp drop in EM Asian imports has been a big surprise.
China is leaning on its massive inventories built prior to the conflict, contributing to the drop in EM Asian imports.
Considerable demand destruction has occurred in more price-sensitive emerging markets.
Refineries have been flexible in adapting to shortages in jet fuel and diesel.
The gap between European diesel and petrol pump prices has since largely closed.
The ability of refineries to produce much more jet kerosene domestically in Europe has helped avert a shortage over the busy summer holiday season.
Jet kerosene prices have fallen, with the gap between crude and kerosene falling from a peak of $92 per barrel on March 30 to around $40 as of May 26.
The pre-war average gap between crude and kerosene was $18.
Central banks have clearly tilted more hawkish in their communications.
The European Central Bank has been the most explicit so far in guiding towards rate hikes.
Rate rises cannot offset the supply shock.
Rate rises can help to anchor inflation expectations.
Longer-term inflation expectations have risen sharply recently.
The European Central Bank hikes would take the deposit rate to 2.5%.
The Federal Reserve's policy is still in somewhat restrictive territory.
The Federal Reserve has arguably a more dovish reaction function than the European Central Bank.
Federal Reserve rates are expected to stay on hold.
There is a risk tilted towards a later resumption of Federal Reserve rate cuts.
The base case for the Federal Reserve is a December rate cut.
There are considerable risks to the view that the growth impact will be relatively mild.