Impact of the War in the Middle East on the Selic Rate

The Middle East War It is a major factor in current economic discussions, especially regarding inflation expectations in Brazil.

In this article, we will explore how this war impacts the Copom's monetary policy and the forecasts regarding the Selic rate.

Furthermore, we will analyze the influence of rising oil prices and the fragility of public finances, factors that have led the market to adopt a pessimistic outlook on interest rates.

Finally, we will address the political situation regarding the 2026 elections and the absence of structural reforms, which fuel fiscal uncertainty and its effects on the national economy.

Impact of the War in the Middle East on the Expectations of the Copom (Monetary Policy Committee)

The conflict in the Middle East has come to have a direct impact on decisions. CupBecause it affects the price of oil, increases transportation costs, and puts pressure on production chains.

Since oil is the world's main energy commodity, any increase tends to spill over into fuels, freight, food, and industrial goods, raising the... inflation in Brazil.

Furthermore, war worsens inflation expectations because businesses and families begin to anticipate higher costs in the future, which already alters prices and wage negotiations now.

The Committee is monitoring this movement cautiously, as unanchored expectations require higher interest rates for a longer period to preserve the credibility of the... monetary policy.

The recent minutes reinforce this diagnosis by highlighting that "the external environment remains more adverse, requiring additional caution."

In other words, the Copom (Monetary Policy Committee) reacts not only to the immediate oil price shock, but also to the risk of contagion affecting the behavior of economic agents.

When the market believes that inflation will persistently remain above the target, the Selic rate needs to remain restrictive to contain demand and avoid a spiral of adjustments.

Thus, the war in the Middle East ceased to be a distant event and became a central variable in determining interest rates in Brazil.

Outlook for the Single-Digit Selic Rate and Market Pessimism

A Single-digit Selic rate This trend is likely to continue into the next decade because the market has begun pricing in a longer cycle of high interest rates, supported by persistent inflation, fiscal risk, and unanchored expectations.

Furthermore, the external oil shock puts pressure on transportation, energy, and food, and this effect spreads throughout the production chain, reinforcing the Central Bank's caution.

The Copom (Monetary Policy Committee) has already signaled concern about the war in the Middle East and its impact on inflation, which reduces the scope for rapid rate cuts.

Ao mesmo tempo, o market pessimism It grows in the face of fragile public finances, a persistent deficit, and a lack of convincing structural reforms.

Em official statement from CopomThe Central Bank is reinforcing its vigilant stance, while... capital market It is already operating with the Selic rate at a high level for a longer period.

Thus, the Single-digit Selic rate in the next long cycle of declines. It appears to depend on lasting fiscal improvement, more controlled inflation, and greater confidence among economic agents.

Oil Price Rise and its Inflationary Waves in Brazil

O oil price, main commodity of the planet, rises and rapidly increases the cost of diesel, gasoline, freight and energy, creating inflationary waves as fuel prices rise, companies adjust prices, squeeze margins, and pass expenses on to consumers, putting pressure on food, industrial goods, and services. The effect is cascading.because any increase in transportation affects the entire production chain.

• public transport
• food and agribusiness
• transformation industry
• trade and logistics

According to the coverage of The rise in oil prices and the ripple effect on prices in Brazil.The soaring price of oil is already affecting fuel, freight, and finished goods, increasing pressure on inflation.

Maintaining the Selic rate above 10% until 2030: Fiscal problems in evidence.

The financial market began to price in the Selic rate above 10% until 2030 because it envisions an environment of fragile public finances, with expenses growing faster than revenue and little room for structural adjustment.

Furthermore, persistent deficits increase the Treasury's financing needs, put pressure on long-term interest rates, and reduce the effectiveness of monetary policy.

In this scenario, the Central Bank tends to act more cautiously, since an unbalanced fiscal situation fuels a de-anchoring of inflation expectations and makes lasting cuts to the Selic rate more difficult.

The war in the Middle East is also on the radar, as higher oil prices increase transportation and production costs, reinforcing inflationary pressures.

Thus, monetary policy becomes hostage to fiscal uncertainty and needs to maintain a restrictive stance for longer, until there is a clear sign of adjustment in public accounts.

The 2026 Elections and the Rise in Fiscal Uncertainty

As 2026 elections This tends to increase the caution of economic agents because, so far, the presidential candidates have avoided clear commitments to structural reforms.

Thus, the market interprets this stance as a sign of continued fiscal weaknesses, especially given the strain on public finances and a debt that already demands a higher risk premium.

Furthermore, the lack of measures to control spending and replenish revenue reduces confidence in the debt trajectory and hinders the formation of stable expectations.

This fiscal uncertainty This contaminates monetary policy, as the Central Bank needs to keep interest rates high for longer to protect inflation and avoid unanchoring expectations.

• increased cost of credit for families and businesses
• Lower productive investment and a weaker pace of activity.
• pressure for the Selic rate to remain at a high level

Meanwhile, the rise in the price of oil, as the main global commodity, reinforces the inflationary shock and amplifies the Copom's dilemma.

Therefore, without reforms, 2026 elections They can sustain high interest rates until the end of the decade.

In summaryThe war in the Middle East and its direct consequences on inflation and monetary policy reveal a complex and uncertain scenario for the coming years.

Living with high interest rates seems to be a reality we will need to face, considering the structural fragility of public finances.