Most major Latin American economies will receive a terms-of-trade boost from the surge in energy prices related to the Iran war. The windfall is likely to be largely saved, which will provide relief to fragile public finances, especially in Colombia and Ecuador, but the impact on growth will be muted. Higher oil prices will push up inflation – in aggregate, headline inflation will be c.0.5%-pts higher this year than our pre-war forecast, with Chile and Peru seeing the largest upward revisions. In Colombia, given the already unfavourable inflation backdrop, that will prompt the central bank to hike interest rates further while central banks in Mexico, Chile and Peru are likely to leave policy settings unchanged in the foreseeable future. The exception is Brazil where, given how monetary policy is already very restrictive, there’s still scope for interest rates to come down significantly – even in an adverse scenario in which oil prices rise further.