31 March 2026
4 min
As we enter the fifth week of the conflict, the world grapples with the likelihood of a prolonged disruption to energy supplies and the potential inflationary impact.
Last week, President Trump announced talks with Iran had been productive and twice postponed attacks on Iranian power supplies, which was closely followed by Iran denying any negotiations were taking place. The Strait of Hormuz remains closed to most ships and attacks continued across the wider Gulf region (in peacetime c20% of world’s oil and gas is shipped through the Strait). Trump’s comments, signalling that a resolution to the conflict was close, failed to calm markets and oil prices rose to levels not seen since 2022 (Brent Crude c$115 per barrel at time of writing).
Over the weekend, the Houthis (an Iran-backed group based in Yemen) joined the conflict and fears grew that another shipping route in the Red Sea, one of the few alternatives to shipping via the Strait of Hormuz, could be disrupted, further impacting global supply chains. Trump continued his threats to take over Kharg Island, Iran’s main oil terminal and major income source, and thousands of US troops have been deployed to the region, increasing the potential for further escalation.
Returns for most major asset classes were negative over the last week (23 – 27 March) and are in negative territory year to date as a result of the conflict and its wider implications.
Markets have adopted a more cautious stance towards the conflict, placing greater weight on tangible ‘actions’ towards resolution rather than ‘rhetoric’, having been caught out previously by premature claims that hostilities were nearing an end.
Looking ahead, three factors are likely to dominate market outcomes:
the duration of the conflict, the extent of damage to infrastructure, and the resulting path of oil prices.
A swift resolution, allowing Brent crude to return towards pre crisis levels, would support a relatively benign macro backdrop of continued economic growth and moderating inflation. By contrast, a more prolonged or escalating conflict, accompanied by sustained higher oil prices, would create a far less favourable environment -characterised by weak or no growth alongside elevated inflation. History suggests that oil prices of around $150 per barrel or higher would materially increase recession risks.
Where outcomes ultimately settle between these two extremes remains uncertain. Our central scenario remains that some form of resolution is achieved, albeit not without further volatility. However, the risk of a drawn out and economically damaging conflict has risen over recent weeks, and markets are likely to continue demanding clearer evidence of de-escalation before pricing in a more constructive outlook.
Risk warning
This article is for intermediaries to be used for information purposes only. It does not constitute an offer or solicitation to invest, it is not advice or a personal recommendation nor does it take into account the particular investment objectives, financial situation or needs of individual clients. Whilst HRIS uses reasonable efforts to obtain information from sources which it believes to be reliable, HRIS makes no representation that the information in this document is accurate, reliable or complete.
The value of your investments and the income from them may go down as well as up and neither is guaranteed. Investors could get back less than they invested. Past performance is not a reliable indicator of future results. Changes in exchange rates and/or tax rates may have an adverse effect on the value of an investment.
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