The surge in oil prices following the escalation of tensions in the Middle East has reignited warnings of runaway inflation, higher interest rates for longer, and pressure on emerging market currencies. But this interpretation, according to Gustavo Pessoa, partner at Legacy Capital , exaggerates the effects of the shock and conflates short-term fears with structural changes.

“The main driver of inflation worldwide generally starts with oil,” Pessoa states on Café com Investidor , a NeoFeed program that interviews leading Brazilian investors. But he makes a key caveat: not every shock becomes a lasting problem.

According to Pessoa, the recent movement in the price of oil was rapid and intense, driven by the risk of disruption in the Strait of Hormuz , a route through which approximately 15% of the globally consumed oil passes. The number is impressive, he says, but the market tends to overestimate extreme scenarios.

"For there to be a real oil shortage, you need a prolonged shutdown. Demand takes time to be destroyed, and the price would have to rise much more," says Pessoa.

The premise used by Legacy Capital is less dramatic than that embedded in shorter-term prices. "We work with the idea that this conflict ends quickly, in weeks," says the partner at Legacy Capital.

This difference in perspective completely changes the interpretation of inflation and interest rates. Pessoa acknowledges that, if the shock persisted, the effects could spread beyond fuels and logistics. But, in the baseline scenario, he sees stronger forces acting in the opposite direction. "The main driver of disinflation in the world today is artificial intelligence," he says.

In his assessment, the weakening of the labor market in the United States, combined with productivity gains, puts pressure on service prices and helps to contain structural inflation. This movement, according to Pessoa, remains more relevant than the one-off rise in oil prices.

Therefore, although central banks have adopted a more cautious stance, Pessoa does not see a regime change. "With this short-term shock, central banks are more careful, but what matters is looking at the long-term oil yield curve, not the spot price," he states. According to him, future prices already reflect the expectation of an easing of the conflict, which limits the risk of persistent inflation.

In Brazil, domestic inflation had already been slowing down before the conflict and remains close to the target. "We are already projecting inflation very close to 3% by mid-year," he says.

According to the manager's assessment, the external shock does not significantly alter this picture. "Inflation running close to the target doesn't combine well with interest rates at 15%," he states, reinforcing the expectation of the start of the rate-cutting cycle. Legacy continues to project an initial cut of 50 basis points, with subsequent moves depending more on the global scenario than on the recent oil price volatility.

In the currency market, Gustavo also deviates from the more defensive pattern adopted by the market. He acknowledges that, in the first moment of stress, the dollar strengthens. But he sees this movement as transitory. "Initially, everyone rushes to the dollar. Then, the fundamentals take over again," he says.

And on that point, he assesses that Brazil is better positioned than other emerging markets. "Brazil is an oil exporter. The terms of trade have improved significantly," he states, indicating that the rise in the commodity price could, paradoxically, favor the real after the initial shock.

In the interview, which you can watch in the video above, Pessoa also analyzes the impact of the presidential elections and says that, at this moment, Flávio Bolsonaro, the right-wing candidate, is the favorite over President Luiz Inácio Lula da Silva.