Markets Wrap: War, Energy and the Return of Inflation Risk

Summary

Podcast Summary: Merryn Talks Money

Episode: Markets Wrap: War, Energy and the Return of Inflation Risk
Date: March 6, 2026
Host: Merryn Somerset Webb
Guest: John Stepek (Senior Reporter, Author of Money Distilled Newsletter)
Podcast Theme: Unpacking major drivers of current market volatility—including war, energy insecurity, and evolving inflation risks—with a UK and global focus.

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Main Theme & Purpose

This episode centers on the turbulent financial markets of early March 2026. Merryn Somerset Webb and John Stepek discuss how the ongoing Middle East conflict, energy shocks, and a fractured global economy are feeding inflation risk and changing investment horizons. Their goal: help listeners understand the links between geopolitics, energy, inflation, and the persistent woes of the UK economy, and what this all means for savers and investors.

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Key Discussion Points & Insights

1. Market Volatility Triggered by Geopolitical Events

• Market Movements: Despite superficial calm, there’s been significant volatility tied directly to the new war in the Middle East.
  • Quote (Merryn Somerset Webb, 02:10):
    “Markets have moved quite a lot. ...The only way you could really say something sensible about this is if you had the faintest idea how long this new war in the Middle East would go on for—and we just don’t.”
• Implication: The unknown length of the conflict holds the key to how long oil prices remain elevated and therefore how persistent inflationary pressures will be.
  • Quote (John Stepek, 02:31):
    “The length of the war means the length that oil prices are elevated and that then has the knock-on effect of—is inflation going to be actually significantly higher than everyone had thought up until about two weeks ago? And therefore interest rates higher.”

2. The Fragility of Developed Economies' Energy Supply

• Global Fracture: Recent events reinforce how vulnerable even developed economies are to supply chain disruptions, especially in energy.
  • “We’re in a global economy that has fractured and that makes every problem about supply.” (Merryn Somerset Webb, 03:18)
• UK-Specific Problems: The UK has not addressed these vulnerabilities meaningfully post-COVID.
  • “Unfortunately in the UK, we haven't really done anything about that. And energy specifically, obviously, is a big issue.” (John Stepek, 03:49)

3. The “Ration Pack Britain” Thesis

• Simon French’s Analysis: UK’s productivity woes are not a mystery: they are due to chronic rationing of energy, land, and capital.
  • “[Simon French] is saying... it’s not actually a puzzle at all. ...We’ve been rationing the supply of three big important inputs, and that's energy, land and capital. So everything's more expensive than it should be.” (John Stepek, 04:23)
  • Policy failures are bipartisan and long-running: “This is not the current government's fault. ...this all happened under... the Tory government and even going back before that.” (John Stepek, 05:14)

4. Political Paralysis and Governance Shortcomings

• Frustration with Policy Inaction: Government’s reluctance or lack of agility to reform, especially on energy taxation (e.g., North Sea oil).
  • “Sometimes they forget they’re actually in power, I think.” (Merryn Somerset Webb, 06:33)
  • Metaphor: MPs dancing on TV as Rome burns—a reflection of misplaced priorities in governance.
    • “There is an element of fiddling while Rome burns that’s very overt...” (John Stepek, 07:36)

5. Structural Link Between Energy Supply & Productivity

• Notable Research: Callum Pickering’s work draws direct links between UK productivity slowdown and declining electricity supply beginning circa 2005-2006.
  • “Productivity started to fall at the same time as the UK’s electricity supply started to decline. ...With the fallen supply of energy came the general flatlining of oil productivity.” (Merryn Somerset Webb, 08:03)

6. Rising Interest Rates and Delayed Consequences

• Interest Rate Cycle: The end of ultra-low rates is feeding pain into private credit markets and revealing deep vulnerabilities.
  • “We now understand the consequences of that. What we don’t understand is the consequences of rate rates ticking up very sharply and moving into a new 40-year interest rate cycle.” (Merryn Somerset Webb, 09:10)
  • Ongoing damage will play out over time, as per Edward Chancellor's warning: “Super low interest rates, they get into all the cracks and you don’t know what the consequences are going to be until quite a lot later.” (Merryn Somerset Webb, paraphrasing, 09:53)

7. Stagflation: The Looming Threat

• Risk of Stagflation: War-induced energy spikes could tip the already “stagnating” UK economy into genuine stagflation.
  • “It doesn't take much to shift a stagnating economy with an energy crisis into stagflation. And that is what we are, stagnating economy with an energy crisis. ...Oh, this is fun, isn’t it?” (Merryn Somerset Webb, 10:57)
• Dampened Optimism: Despite some market hopes for rate cuts, the mood is wary with forecasts shifting quickly.
  • “There are still assumptions in the market there will be one cut this year. But you're right, I mean, that could change.” (John Stepek, 10:39)

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Notable Quotes & Memorable Moments

• On government inertia:
  “Sometimes they forget they’re actually in power, I think.”
  — Merryn Somerset Webb [06:33]

• On the link between energy and productivity:
  “Productivity started to fall at the same time as the UK’s electricity supply started to decline... That might be the most important chart of this millennium.”
  — Merryn Somerset Webb and John Stepek [08:03–08:59]

• On current mood in the UK:
  “We’re stagnating. ...If you get to the point where we're muttering about, isn't it marvelous that GDP growth is going to be 1.1%? I mean, this is not exciting.”
  — Merryn Somerset Webb [10:57]

• Humorous exchange on podcast optimism:
  “I think one of our readers was saying recently that we're a bit too gloomy...”
  — John Stepek [11:25]
  “You can challenge John and this podcast. Optimistically.”
  — Merryn Somerset Webb [11:32]

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Timestamps for Important Segments

| Timestamp | Segment Description | |------------|-------------------------------------------------------------------------------| | 01:48 | Show intro—host and guest introduce the week’s themes | | 02:10 | Markets shaken by the Middle East conflict—emphasis on unknowns | | 03:49 | Deep dive: UK’s structural energy and productivity vulnerabilities | | 04:23 | “Ration Pack Britain”: Roots of UK productivity malaise | | 06:24 | Policy frustrations: North Sea oil taxation, the inertia of government | | 07:36 | Satirizing politicians’ misplaced priorities (Strictly Come Dancing anecdote) | | 08:03 | Fundamental research: Energy supply as the root of slumping productivity | | 09:10 | Rising rates, private credit risk, the great regime shift | | 10:48 | The specter of stagflation and what the next few months may bring | | 11:25 | Host/guest banter: gloom vs. optimism |

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Tone & Style

The conversation is honest, incisive, and darkly humorous—Merryn and John don’t shy away from blunt assessments (“Well meaning is not a good excuse for being stupid,” [05:07]) but also inject light-hearted banter, particularly as they joke about the persistent gloom in their analysis.

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Useful Takeaways for Listeners

• There’s no clear market outlook—too much depends on unknowable geopolitical outcomes.
• The UK’s productivity crisis traces directly back to energy supply and policy failures, which are fixable but require real political will.
• High energy prices threaten more than inflation—they risk tipping weak economies into stagflation.
• The era of ultra-low rates is over; new consequences are surfacing more slowly and pervasively than many expected.
• Pressures on policymakers are immense, but action remains halting and incremental.

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For further insights and ongoing commentary, subscribe to the Money Distilled and Merryn Talks Money newsletters.

Transcript

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Bloomberg Audio Studios Podcasts Radio News.

[Marin Sampson Webb]

Welcome to the Marin Dogs Money Market Wrap, where we talk about the biggest moves in markets this week and what is driving them. I'm Marin Sampson Webb, Editor at Large for Bloomberg UK Wealth.

[John Stepwick]

And I'm John Stepwick, senior reporter and author of the Money Distilled newsletter.

[Marin Sampson Webb]

Don't know, John. Mark has barely moved this week. Not sure we should bother what's going on.

[John Stepwick]

Should we wrap it up there? Yeah, aye, be fine. See you next week.

[Marin Sampson Webb]

The thing is that actually markets have moved quite a lot. It's just that there's not that much that we can add to the fact that they have moved quite a lot right up, down, all over the place. And the only way you could really say something sensible about this is if you had the faintest idea how long this new war in the Middle east would go on for and we just don't.

[John Stepwick]

Yeah, and that is specifically the point because the length of the war means the length that oil prices are elevated and that then has the knock on effect of is inflation going to be actually significantly higher than everyone had thought up until about two weeks ago and therefore interest rates higher so it's a big deal. It's got a lot of big potential consequences. But unless you've literally get across the wall, then there's no way to say what those consequences are going to be.

[Marin Sampson Webb]

So we can have relentless conversations about how many days worth of oil reserves every economy has about who is the most reliant on oil from the Middle East, Korea and Japan, by the way, and which markets therefore should suffer the most over the long term as a result of the war dragging out or not dragging out. But in the end, it comes down to what we have absolutely no idea, and we will find out in the fullness of time. But I suppose what we can talk about is the way in which this war and the immediate energy crunch that it has resulted in shows us the vulnerabilities in developed economies in general. I know you've written this week about the vulnerability inheritance in the UK economy, and it just reminds us that we're in a global economy that has fractured and that makes every problem about supply.

[John Stepwick]

Yeah, I think that's a really good way to put it. I mean, we've seen this. I mean, I guess this has been coming for quite a while and people have been worried about the fracture in the supply chains. Obviously, Covid made it very obvious how vulnerable we are and how reliant we are. But unfortunately in the uk, we haven't really done anything about that. And energy specifically, obviously is a big issue. But as Simon French, podcast regular from Panmure Labor Room, pointed out, please go

[Marin Sampson Webb]

back and listen to the podcast we did with him recently on mmt.

[John Stepwick]

Yes, very interesting. Worth listening in particular now, very timely at the moment, but the thing. Simon put a piece this morning called Ration Pack Britain, kind of inspired title, really. And what he's saying is that the big thing behind the UK's productivity puzzle, as in the fact that we don't seem to be getting more out of what we're doing, is that it's not actually a puzzle at all. It's very clear what the problem is, and it's because we've been rationing the supply of three big important inputs, and that's energy, land and capital. So everything's more expensive than it should be. Most of this arises from. Yeah, you could call it well meaning. I think stupid is a better word.

[Marin Sampson Webb]

You can be stupid and well meaning.

[John Stepwick]

Yeah, yeah, exactly. Well meaning is not a good excuse for being stupid.

[Marin Sampson Webb]

And well meaning kind of disappears after it's been explained to you a certain number of times.

[John Stepwick]

Exactly. So the fact that we've kind of cut off various sources of energy to ourselves. The fact that you can't, you know, a house or anything else in the country without jumping through millions of hoops, and the fact that we've kind of sabotaged our own capital market by getting ready tax breaks for investing locally and keeping them for investing wherever the hell you want hasn't helped any of this. Simon's point is actually most of these things are actually reversible. If you're the sensible government in power, then you could change all these things. And it's not the current government's fault. The current government has compounded it with even dafta policies and Labour and all the rest of it. But, you know, this all happened under, you know, the previous kind of like the Tory government and even going back before that. So I guess the only way that it does change is if voters start to wake up to and demand change. I mean, the North Sea oil is a good example. Rachel Reeves seems to be kind of thinking about maybe reducing the ridiculous tax rate on North Sea oil exploration, but we're still not there yet. Just do it. Yeah, you know, that's straightforward.

[Marin Sampson Webb]

Well, it's interesting. I mean, they said, didn't they, today or earlier this week, that they're working on looking at ways to, like, how hard can it be?

[John Stepwick]

How hard can it be?

[Marin Sampson Webb]

You don't need to look at ways to. You can just cut that tax or take that tax away. Sometimes they forget they're actually in power. I think.

[John Stepwick]

Yeah, I think they do. Increasingly they all seem to not realize that this is actually their job now.

[Marin Sampson Webb]

I mean, there was something on the radio this morning, I can't even remember what it was about, but I was listening to some minister or the other and the interviewer said to him, well, are you going to do this particular thing? Thing? And he said, yes, no parliamentary time allowing. And I'm like, you're the government. Make it for parliamentary time. And this is another one of those things. You want to do it or why don't you just do that? Yeah.

[John Stepwick]

And I mean, you can see why people get frustrated. I mean, there was a good. I mean, it's a daft example and it wouldn't draw attention in different times if it wasn't for the fact it's such a big metaphor for what's going on with our governance right now, which is that a load of MPs were pictured taking part in some Strictly Come Dancing thing, which was kind of meant to emphasize it, to be a focus on how exercise is good. For you.

[Marin Sampson Webb]

Some of them are quite good at dancing.

[John Stepwick]

I'm sure they are.

[Marin Sampson Webb]

Some of them are really bad.

[John Stepwick]

Maybe I'll go back and watch it. But there is an element of fiddling while Rome burns that's very overt and kind of. It's just. Regardless of whether it was actually a perfectly reasonable and sensible use of parliamentary

[Marin Sampson Webb]

time, there's really important stuff going on and we'd like you to do that. Not dance.

[John Stepwick]

Exactly.

[Marin Sampson Webb]

There's a time for dancing, there's a time for doing. Yeah. Listen, this all comes back copyright that.

[John Stepwick]

That's good, that's catchy.

[Marin Sampson Webb]

You know I will. Yeah, we'll put it in our marketing. This brings us back to a podcast that we did with Callum Pickering a while back. Do you remember this? About a year ago, and I can't his. He had a paper out called does the UK Lack the Energy for Productivity? And the chart was just so startling because at the time, and even now, lots of people believe that the UK's productivity problem started in 2007, 2008. So after the GFC and his work and his charts are so clearly, that productivity started to fall at the same time as the UK's electricity supply started to decline. And that was in 2005, 2006, early 2006. So with the fallen supply of energy came the general flatlining of oil productivity.

[John Stepwick]

As I mean, to us, that might be the most important chart of this millennium. Because I remember your most important chart in the world used to be the bank of England forecasted what would happen when interest rates went back up.

[Marin Sampson Webb]

Well, what was that 3,000 year chart of just showing them being ridiculously low relative to 3,000 years worth of history. And then I went through a phase of saying, well, the most important chart in the world is now the one where it begins to tick up. Because we've got used to the idea of what happens when interest rates are below zero or zero. We now understand the consequences of that. What we don't understand is the consequences of rate rates ticking up very sharply and moving into a new 40 year interest rate cycle. Well, they will be consistently higher than they've been in the past. And interestingly, you know, I thought that would happen reasonably quickly. I thought the consequences of that shift in the interest rate environment would be seen in a year, 18 months or so. But actually it's taken a lot longer. But we're seeing it now, right? And we're seeing it, for example, in the private credit market. Lots of our colleagues will have written about that. But you're seeing fund after fund after fund saying pretty, quite a lot of nasties in there as the private credit environment begins to see defaults, right downs, mini collapses, et cetera. So that's in there. And as Edward Chancellor, another regular on the podcast, as he always says, you know, super low interest rates, they get into all the cracks and you don't know what the consequences are going to be until quite a lot later. And I think we are beginning to see some of those consequences and going back to neither of us knowing what on earth is going to happen with this war. One thing we do know is that even if it stops very quickly, it will still show up a little bit in cpi. It will still make a difference to the easing cycles. And the assumption that the next rate move in the UK will be down is pretty much already done for, isn't it?

[John Stepwick]

I think the assumption there are going to be two cuts, I think that there's still assumption in the market there will be one cut this year. But you're right, I mean, that could change.

[Marin Sampson Webb]

That could change. And there is not the real risk here. Stagflation.

[John Stepwick]

Yeah, I mean stagflation. And that would be a nightmare given that we're already borderline stagflation in the UK anyway.

[Marin Sampson Webb]

Well, we're stagnating. I mean, that's pretty clear if you get to the point where we're muttering about, isn't it marvelous that GDP growth is going to be 1.1%? I mean, this is not exciting. 1.1% is very, very bad. And in terms of GDP per head, well, we all know where that goes. So, you know, this is not good. The UK is stagnating and it doesn't take much to shift a stagnating economy with an energy crisis into stagflation. And that is what we are, stagnating economy with an energy crisis. Oh, this is fun, isn't it? Yeah.

[John Stepwick]

I think one of our readers was saying recently that we're a bit too gloomy, but I'm not sure what else

[Marin Sampson Webb]

you can challenge John and this podcast. Optimistically,

[John Stepwick]

it could help you over by Christmas.

[Marin Sampson Webb]

All right, that's it. I'm calling, I'm calling a halt to this podcast. That's really all we can say for now because as I say, there's much volatility in markets. There's a lot of emotion in markets. There's a lot going on with both energy and with the whole AI conversation we've had over and over. Lots to think about, lots to talk about. Don't forget that we both write newsletters trying to analyze some of these issues and hopefully things will be become clearer over the next week or so. Thank you. John.

[John Stepwick]

Thanks Merlen.

[Marin Sampson Webb]

Thanks for listening to this week's Marin Talks Money. If you like our show, rate, review and subscribe wherever you listen to your podcast and keep sending your questions or comments to marinmoneyloomburg.net you can also follow me and John on Twitter or x John is really going for it on Twitter at the moment. By the way. Well worth following if you don't already. I'm MarionSW and John is JohnStepek. This episode was hosted by Mima and Somerset Webb. It was produced by Summer Society and Moses and.

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