Chart of the Week
In February 2022, the Russian-Ukrainian conflict led to a sharp rise in energy prices (oil, natural gas), which contributed decisively to the inflationary shock observed a few months later in the eurozone (+10.6% over 12 months in October 2022). This shock hurt the profitability of industrial companies and placed
considerable pressure on the budgets of both consumers and local authorities.
As an indirect consequence, the euro also slipped below parity with the dollar in September 2022. Since commodities are usually traded in dollars on global markets, the euro’s collapse drove up the cost of fossil fuel imports for the region, adding to the economic turmoil for local businesses. However, this trend seems to be reversing in 2025. Since the beginning of the year, the euro has appreciated by almost 10% against the dollar, and oil prices have dropped by 15%.
OUR ANALYSIS
There are several reasons behind the decline in oil prices. First, the outlook for demand has worsened due to forecasts of a global economic slowdown this year, potentially exacerbated by the effects of the trade war. Second, on the supply side, some OPEC countries are tempted to exceed quotas to regain market share and improve their public finances, while non-OPEC supply growth remains positive. We’re also seeing the impact of the lower “oil intensity” of global GDP (energy efficiency and the shift away from fossil fuels).
For Europe, the drop in oil prices is good news. It could help reduce inflation in the eurozone between the third and fourth quarters of 2025 and give the ECB more flexibility. By boosting purchasing power, it could also provide significant support for growth at a time when trade tensions are creating uncertainty.
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Written on 11 April 2025. Opinions subject to change.
See also: https://latribune.lazardfreresgestion.fr/en/investment-grade-bonds-supportive-technicals/
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