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Is the oil curve signaling temporary stress or higher inflation?

March 18, 2026

It’s clear that oil markets are experiencing an acute near term supply shock as a result of the spreading conflict in the Middle East, with the West Texas Intermediate (WTI)* curve moving into record backwardation as front month contracts surged far above longer dated prices. That structure reflects extreme short term tightness rather than expectations for a lasting inflation regime, as the curve continues to slope sharply downward beyond the front end. “Oil markets are pricing a massive, short term supply shock as oil markets reached record levels of tightness,” says Garrett Melson, CFA®, Portfolio Strategist. 

Still, as Jack Janasiewicz CFA®, Multi-Asset Portfolio Manager and Lead Portfolio Strategist, cautions, “If those farther out contracts start to move up, that’s telling us futures traders are expecting the equilibrium price to settle at a higher range than we were previously in.”

 

WTI Crude Curve (1/3/14 - 3/8/26)
wti-crude-curve-line-graph Source: Bloomberg.
  • We believe today’s backwardation reflects possible near term supply stress rather than expectations for persistently higher oil prices. 
  • The risk to this view remains a more protracted conflict and damages to the oil infrastructure that could result in a more meaningful physical supply disruption.
  • Should energy prices remain elevated for a protracted period of time, the downside risks to growth could begin to exceed the upside risks to inflation as the economy slows at a time when the consumer has limited savings, a falling wage and a cooling labor market.  
  • Policymakers have fewer tools to offset physical supply disruptions, increasing the potential risks for a more prolonged supply disruption.

*West Texas Intermediate (WTI) is a high‑quality North American crude oil used as a global benchmark.

CFA® and Chartered Financial Analyst® are registered trademarks owned by the CFA Institute.

This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers, or any of its affiliates. The views and opinions expressed may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. Investors should fully understand the risks associated with any investment prior to investing.

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