Financial Experts Weigh In on Middle East Military Action’s Market Impact

Following weekend military strikes involving the U.S. and Israel against Iran, market analysts are predicting significant volatility in oil prices and global markets. Experts warn that energy costs could spike dramatically if regional tensions escalate further.

Financial markets are bracing for potential upheaval after the United States and Israel conducted military operations against Iran over the weekend, with President Donald Trump stating the action would eliminate security risks and potentially empower Iranian citizens to challenge their government.

The military action has heightened concerns among oil-producing nations in the Persian Gulf region as tensions continue to mount, prompting Iran to fire missiles toward Israeli territory in response.

According to four industry sources, several major oil companies and prominent trading firms have halted petroleum and fuel transport through the Strait of Hormuz due to the ongoing hostilities.

Market specialists are offering their perspectives on the potential economic fallout:

Vishnu Varathan, who leads macro research for Asia excluding Japan at Mizuho in Singapore, explained: “A broader state of spots of regional attacks/instability may be par for the course – in line with Iran’s warning. Oil prices are likely to remain elevated as production and passage remain prone to attacks and disruptions. OPEC may be under pressure to raise production to try and offset. But a 10-25% premium on oil is not outlandish – even without a blockade of the Straits of Hormuz, which is easily a 50% premium risk event.”

Christopher Wong, a strategist with OCBC in Singapore, noted: “The strike raises geopolitical risk premia as markets head into Monday’s open. The immediate reaction function is fairly predictable: safe-haven assets such as gold are likely to see an upside gap, while oil prices may also firm on supply-disruption concerns. Risk assets and high-beta currencies… could face an initial bout of volatility, particularly if headlines suggest potential retaliation or regional spillovers.”

Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore, offered a concise assessment: “Energy is still inexpensive. That’s the obvious sector that rallies on Monday. And gold.”

Saul Kavonic, an energy analyst with MST Marquee in Sydney, provided a more detailed analysis: “Early indications are of a broader scale attack on Iran, with counterattacks which could escalate to draw in multiple gulf countries. If the Iranian regime feel they face an existential threat, attempts to block the Strait of Hormuz cannot be ruled out. The US and allies will have military escort plans to try protect passage through the Strait.”

Kavonic continued: “But if Iran were to manage to disrupt flows through the Strait, over 20% of global oil and LNG flows could be impacted. This could present a scenario three times the severity of the arab oil embargo and Iranian revolution in the 1970s, and drive oil prices into the triple digits, while LNG prices could retest the record highs of 2022.”

He further warned: “The scope for intentional and unintentional escalation in these circumstances is broad and hard to predict. Initial oil market reactions will price in higher risk of various scenarios that may disrupt supply, from a more modest disruption to 2mmbbld of Iranian exports, to attacks on regional oil infrastructure, through to disruption of passage through the Strait of Hormuz in the most extreme scenario. This could add several dollars more to oil, poised for even higher price spikes is the conflict escalates.”

Regarding the critical shipping route, Kavonic concluded: “A full prolonged closure of the Strait of Hormuz is unlikely. But even a partial disruption of flows, especially as some tankers avoid the region, could see several million barrels per day of oil disrupted which would still send oil over $100.”