Energy markets face an aggressive price response, with ICE Brent potentially trading at $80-90 per barrel immediately, with risks of further strength towards $100 and ultimately $140 in a worst-case scenario if significant oil supply disruptions occur. European gas prices could see more aggressive moves given risks to Qatari LNG flows, with TTF potentially spiking to €80-100 per MWh.

Turkey faces the highest exposure to oil price increases, with a 10% rise translating to 1.10 percentage points in CPI due to complete dependence on oil imports and weakening currency. Romania follows with 0.50pp sensitivity despite having the lowest net energy imports in the region, while Hungary shows 0.45pp sensitivity due to limited local fossil fuel resources.

Central banks across the region are postponing rate cuts indefinitely. The National Bank of Poland, which was expected to cut rates by 25 basis points to 3.75% this week, now seems unlikely to proceed. "A rate cut now seems rather unlikely," said Frantisek Taborsky, EMEA FX & FI Strategist at ING. Hungary's central bank, which cut rates last week for the first time since September 2024, will likely delay further cuts due to elevated inflation expectations and a weaker forint.

CEE currencies face pressure from risk-off sentiment, with the Hungarian forint and Turkish lira most exposed due to heavy long positioning. EUR/HUF is expected to return above 380 as carry positions come under pressure, while the Turkish central bank announced readiness to intervene with record FX reserves of $206 billion.