Iran war adds 1.5–2.0 inflation points over 2026–27, Reis estimates
Ricardo Reis estimates a cumulative 1.5–2.0 percentage point inflation impact from the Iran war over 2026–27. His Bank for International Settlements (BIS) paper, published October 19, 2026, finds no loss of the long-term inflation anchor.
Price pressures outlast the shock
Reis examines transmission through sticky prices, expectations, fiscal policy and central bank credibility in the euro area, UK and US.
After conflict began on February 28, 2026, Strait of Hormuz transit fell roughly 90 percent and oil rose from the mid-$60s to above $115. UK price microdata indicate accumulated price pressures: sticky-price transmission contributes 1.2–1.6 percentage points over 2026–27, while expectations add 0.3–0.4 points in 2027.
The same price distribution reduces monetary tightening's effect on inflation.
Adjusted market prices indicate that the long-term anchor remains intact.
Reis stresses that these are conditional estimates using data available through May, not forecasts; the calculations combine evidence from different regions.
Fiscal uncertainty meets shorter horizons
International Monetary Fund forecast revisions leave fiscal amplification unresolved: Sweden expanded support while France exercised restraint.
Discussant Francesco Bianchi links earlier inflation persistence to pandemic fiscal stimulus and warns that fragile public finances can undermine tightening.
Sarah Lein emphasizes shorter expectations horizons.
Evidence from 3,840 Swiss firm survey responses puts pass-through from one-year expectations to planned prices and wages near 0.25. Her illustrative calculation adds 0.3 percentage points to planned prices, excluding later wage effects.
An anchor is not immunity
Reis argues that persistence into 2027 warrants more than simply looking through the energy shock.
He also finds a repeat of the 2022 tightening unwarranted.
Lein's discussion reinforces the distinction: anchored long-term expectations do not prevent near-term expectations from feeding into prices and wages.
Source: Inflation after the Iran war
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