Middle East Tensions Send Shockwaves Through Global Markets
Escalating tensions in the Middle East are casting a long shadow over global financial markets, prompting investors to reassess risk and seek safe havens. The region, a critical hub for energy production, is facing a potential surge in military conflict, raising concerns about supply disruptions and broader economic fallout.
Oil: The Barometer of Conflict
The immediate impact of rising geopolitical risk is most keenly felt in the energy sector. Brent crude oil has already seen a 20% increase since the start of the year, reaching $73 per barrel. However, the potential for further escalation remains significant. Several major oil companies have begun halting oil shipments through the Strait of Hormuz due to growing security concerns.
Analysts at Capital Economics predict that even a contained conflict could push Brent crude prices to around $80 per barrel. A prolonged disruption, however, could send prices soaring to $100 per barrel, potentially adding 0.6 to 0.7 percentage points to global inflation.
Cash Flows to Safe Havens
In times of uncertainty, investors flock to safe-haven assets. Gold and silver, already up 22% since the beginning of 2026, are expected to continue attracting strong inflows. In the foreign exchange market, experts at CBA Bank anticipate the US dollar will strengthen against most currencies – with the exception of the Japanese Yen and Swiss Franc – should the conflict escalate and disrupt oil supplies. This is due to the US being a net energy exporter, benefiting from higher oil and gas prices.
Conversely, the Israeli Shekel is likely to face significant selling pressure. JP Morgan warns that these market risks could grow more persistent if the conflict expands regionally.
Interestingly, Bitcoin has not been viewed as a safe haven in this instance, experiencing a 2% decline on February 28th and continuing a downward trend that has seen it lose over 25% of its value in the past two months.
Stock Markets Signal Caution
The initial reaction in Middle Eastern stock markets on March 1st will provide an early gauge of investor sentiment. These markets are highly correlated with oil prices but could experience broader economic repercussions if the conflict intensifies. NeoVision Wealth Management forecasts that stock markets in the Gulf region could fall by 3-5% depending on the scale of the fighting.
Saudi Arabia’s main stock index had already fallen 1.3% over the previous five days as of February 26th, marking a two-week decline. The Dubai stock exchange also experienced a downward trend over the same period.
Globally, the widespread cancellation of flights to and from the Middle East is expected to put significant pressure on airline stocks. Conversely, European defense stocks, which have risen by 10% since the start of 2026, are likely to continue benefiting from increased demand for weaponry amid the uncertainty.
Frequently Asked Questions
- What is the biggest immediate risk? The biggest immediate risk is disruption to oil supplies, which could lead to higher prices and increased inflation.
- Which assets are considered safe havens? Gold, silver, and the US dollar are generally considered safe-haven assets during times of geopolitical uncertainty.
- How will this affect the stock market? Stock markets in the Middle East are particularly vulnerable, but global markets could also experience volatility.
- Is Bitcoin a safe haven? Recent market behavior suggests Bitcoin is not currently being viewed as a safe haven asset.
Did you know? The Strait of Hormuz is a strategically vital waterway through which approximately 20% of the world’s oil supply passes.
Pro Tip: Diversifying your portfolio across different asset classes can help mitigate risk during periods of geopolitical instability.
Stay informed about the evolving situation and its potential impact on your investments. Explore our other articles on global market trends and geopolitical risk for further insights.
