The escalation of hostilities involving Iran is rapidly becoming a major shock to global energy markets. With shipping through the strategically vital Strait of Hormuz effectively halted, a critical artery for the world’s oil trade has been disrupted, threatening supplies that underpin the global economy. As exports from Gulf producers stall and crude prices surge, investors and policymakers are increasingly concerned that the conflict could trigger a renewed wave of inflation reminiscent of earlier wartime energy shocks, adding fresh uncertainty to financial markets already grappling with geopolitical risk. Our Chief Investment Officer, Jeff Brummette, provides a concise update on how markets have been reacting to the conflict.
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As the war in Iran enters its second week, concerns over global oil and gas supplies are intensifying. The Strait of Hormuz has effectively been closed to shipping, with Iranian drones and missiles making transit extremely hazardous. Nearly one-fifth of the world’s oil supply passes through the Strait every day, but current flows have all but ceased. As a result, Gulf oil producers are unable to export crude, storage facilities are reaching capacity, and production is now being curtailed.
Tankers Passing Through the Strait of Hormuz

Source: Vortexa
In response, oil prices have surged, with Brent rising to about $100 a barrel, although in inflation-adjusted terms this remains below the levels seen at the outset of the war in Ukraine.
The Real Price of Oil

In U.S. dollars of 1982-1984; adjusted by U.S. inflation index
Source: Bloomberg
In an attempt to stabilise markets, President Trump has offered U.S. Navy escorts for tankers transiting through the Strait and proposed U.S. government backed reinsurance for shipping, but details remain unclear and markets have been largely unimpressed. The G7 is also considering a coordinated release from their strategic petroleum reserves to contain price pressures.
Until shippers are confident that the Strait can be transited safely, upward pressure on oil prices will persist. While U.S. and Israeli military leaders believe Iran’s missile and drone capabilities can be neutralised, the timing of any such outcome remains uncertain.
Markets are currently in a sell first, think later mode, with both equities and fixed income under pressure on fears that higher oil prices will feed through to inflation. Should elevated energy prices persist for several months or more, those concerns may ultimately prove justified.
Historically, periods of war have tended to be inflationary, driven by supply disruptions, higher energy and commodity costs, increased defence, and, often, looser fiscal policy.
U.S. Inflation Rate in Wartime Periods

Source: BLS: NBER: RSM U.S.
The price and value of investments and any income that might accrue may fall as well as rise and is not guaranteed. You may not get back the amount of your original investment.
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Hear more from the Oakglen experts
Our investment team continue to provide interesting and informative content to help keep you in the loop on recent global news and market trends. See below for some key highlights from around the world which our Chief Investment Officer has also recently covered:
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