The escalation of the conflict in the Middle East has strongly pushed up the price of oil: Brent has risen by nearly 30% in a week and over 50% so far this year, reflecting market expectations about the impact of the conflict on the global energy supply. For Argentina, the shock has a "mixed effect: on the one hand, it improves the terms of trade thanks to the higher crude oil price and the growth of non-conventional production in Vaca Muerta, which expands the potential for energy exports," according to a report by the financial services firm Criteria, which was accessed by the Argentine News Agency. The downside is seen in the dynamics of local inflation. Fuels have already registered increases of nearly 7% at service stations in the AMBA (Greater Buenos Aires Area), while inflation expectations and core inflation show some acceleration, which adds an additional challenge to the disinflation process. The recommendation of the Criteria Committee is to maintain a constructive view on sovereign dollar-denominated debt, extending exposure on the local yield curve with a preference for AL30 and AE38; in pesos, for conservative profiles, prioritize short-duration CER instruments such as X15Y6, X29Y6 or TZX26. From a macroeconomic point of view, the main channel of impact for Argentina is observed in the terms of trade. The country is facing this price shock with a significantly greater supply elasticity than in previous episodes, such as the one recorded on the eve of the Russian invasion of Ukraine in 2022. The sustained growth of non-conventional production in Vaca Muerta means that the effect is not limited to an improvement in international prices, but is amplified by an increase in exportable volumes. This positive external shock not only improves the relative price of energy but also the country's effective capacity to capture that improvement through higher exports, according to Criteria specialists.
The downside of this external push is seen in the dynamics of domestic prices.
