- March 3, 2026
The conflict between Iran, the United States and Israel have entered a phase of direct and sustained military confrontation, materially reshaping geopolitical risk and global market expectations. What began as heightened tension escalated sharply on 28 February with coordinated U.S.–Israeli strikes inside Iran targeting strategic military and nuclear facilities. Iran has since responded with waves of missile and drone attacks against Israel and U.S. bases across several Gulf states. Airspace closures across the UAE, Qatar, Bahrain and Kuwait, alongside widespread transport disruption, underscore that this is no longer a contained escalation but an active regional war.
The most globally significant consequence centers on the Strait of Hormuz, the world’s most critical energy chokepoint. While Iran has not formally declared the Strait closed, direct strikes on tankers and maritime infrastructure, combined with warnings from the Islamic Revolutionary Guard Corps, have created a de facto blockade environment. Tanker flows have reportedly fallen by roughly 70 percent, with more than 150 vessels including crude tankers, Liquefied Natural Gas (LNG) carriers and container ships — anchored or trapped within the Gulf. Major global shipping lines have suspended transits and rerouted vessels around the Cape of Good Hope, adding weeks to shipping times and materially increasing freight and insurance costs.
The scale of disruption risk is substantial. Approximately 20 percent of global oil supply close to 20 million barrels per day normally transits through the Strait, along with a significant share of global LNG exports. Even partial interruption places severe strain on physical energy markets. Alternative pipeline routes from certain Gulf producers cannot replicate normal maritime volumes, meaning markets are now pricing tangible supply and logistical constraints rather than hypothetical risk.
Energy markets have reacted decisively. Brent crude has surged into the low $80s per barrel, with the potential for further upside should disruption persist. Natural gas markets face even greater stress following strikes on Qatar’s major LNG facilities at Ras Laffan and Mesaieed, forcing production halts from one of the world’s largest exporters. The shutdown of Saudi Arabia’s Ras Tanura refinery after a drone strike has further tightened refined product markets. Together, these developments increase the probability of sustained energy price pressure.
Financial markets globally have responded with broad risk aversion. Equity indices across the U.S., Europe and Asia have experienced elevated volatility, safe-haven assets such as gold have strengthened, and Gulf markets have seen sharp declines with temporary trading suspensions. The combination of disrupted shipping, damaged infrastructure and escalating military activity has rapidly altered investor sentiment across asset classes.
The macroeconomic implications are meaningful. Energy-importing economies face renewed inflationary pressure at a time when several central banks had begun signaling policy easing. Persistently elevated oil and gas prices would complicate monetary policy, potentially dampen consumer demand and strain emerging markets with heavy energy dependence. Energy-intensive industries such as aviation, transport and heavy manufacturing may encounter margin compression, while defense, cybersecurity and energy security infrastructure are likely to attract increased investment.
The trajectory of markets will ultimately depend on duration. Markets tend to price worst-case scenarios early, but the enduring economic impact will hinge on whether physical supply disruption remains partial and temporary or evolves into a sustained halt. The central variable remains the Strait of Hormuz. If shipping continues, even at reduced capacity and higher cost, markets may stabilize over time. A prolonged blockage, however, would extend consequences beyond energy into global growth, inflation dynamics and trade stability.
In this environment, investor discipline is paramount. History consistently shows that markets initially overshoot during geopolitical shocks before stabilizing as clarity emerges. Long-term investors should remain aligned with their strategic asset allocation and avoid reactive decision-making driven by headlines. That said, this is an appropriate moment to review portfolios with advisers. Investors may wish to assess exposure to energy-sensitive sectors, consider whether allocations to real assets or energy-linked investments provide adequate hedging characteristics, and ensure sufficient liquidity buffers are in place to navigate volatility or take advantage of potential dislocations. Adjustments, if warranted, should be deliberate and measured.
The conflict is active, ongoing and directly intertwined with the world’s most important energy artery. We remain closely engaged with developments and continue to evaluate implications for global markets and portfolio positioning as events unfold.