Economist: Oil Did Not Reach 200, but the Crisis Still Hit Your Wallet

2025 was remembered for tariffs, while 2026 will be remembered for the Strait of Hormuz crisis. The crisis, which has lasted seven months, has become the main economic shock of this year. “Paradoxically, something now shakes the global economy every single year,” said economist Jokūbas Markevičius, Head of Capital Markets and Analysis at Profitus, on the programme “Investicijų espresso”, according to a press release.

It Was Diesel, Not Oil, That Became More Expensive

At the beginning of the crisis, analysts predicted that a barrel of oil would cost 200 dollars. That did not happen. However, petroleum products reached that level: diesel costs around 200 euros per barrel. It is diesel and other petroleum product prices that are reducing people’s purchasing power the most in Europe and the US. Trucks, agricultural machinery and parts of industry run on diesel, so its price affects the prices of almost all goods.

Europe Is More Vulnerable Than It Seemed

After the start of Russia’s war, Europe built liquefied natural gas terminals and invested more in renewable energy. Nevertheless, gas storage facilities are currently at their lowest filling levels in 15 years, while gas in Europe sometimes costs up to eight times as much as in the US.

This is also evident in industry. German industry still produces around 10% less than before the pandemic. Lithuania stands out here: over six years, our industrial output has grown by approximately 10%.

Why Inflation in Lithuania Is the Highest in Europe

Inflation in Lithuania exceeds 5% and is the highest in the European Union. According to J. Markevičius, one reason is that energy accounts for a larger share of our consumer basket than in any other EU country. In addition, fuel and heating prices have been pushed up by domestic decisions: heating concessions were abolished and excise duties increased at the beginning of the year.

Nevertheless, the economy is growing. In the second quarter, Lithuania’s GDP grew by 3.8%. Wages are rising by around 9% annually, while unemployment stands at approximately 6%. Growth is driven by investment: corporate investment, defence projects, the Rūdninkai military training area, Rail Baltica, as well as pension reform and increased consumption.

Why Loans May Remain Expensive

A change that is not directly related to oil prices, but is important to every borrower, is taking place in the bond market. Technology giants are borrowing billions for data centres, governments are borrowing for defence, and central banks are no longer buying bonds.

“The supply of borrowing has increased significantly, while demand has declined,” the economist explains. As a result, interest rates may remain higher than before the pandemic for a long time. This matters to anyone planning to take out a mortgage.

Will Housing Become Cheaper?

This is the question that concerns most people. Over six months, housing prices in Lithuania rose by around 14%, while construction costs increased by only a few percent. Rental yields have fallen to approximately 4%, even before deducting taxes, repairs and other expenses.

In J. Markevičius’s assessment, a decline in prices should not be expected. With interest rates rising and responsible lending rules in place, investor demand should decrease while supply increases. Therefore, stabilisation is the most likely outcome. According to him, a larger decline occurs only when an economic downturn coincides with high levels of debt, as in 2008.

What the Economy Will Look Like Going Forward

Whether Lithuania’s economy will maintain its growth rate and what to expect in the markets will be discussed on 19 November at the Financial Freedom Forum, which is being held for the fifth time this year.

The forum will feature President Dalia Grybauskaitė and former Ukrainian Minister of Economic Development and Trade Aivaras Abromavičius. Financial markets and interest rates will be discussed by Linas Mickus, Senior Financial Analyst at SEB Bank, Rasa Platūkienė, Head of the Trading Division at the Bank of Lithuania, and Marius Dubnikovas, Head of Investments at Orion Securities. The forum’s patron is SEB Bank.

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