Investors Brace for Bigger Backlash From Mideast War

Conflict in the Middle East becomes a top worry for investors with ramifications for global trade and inflation.

Published on Mar. 2, 2026

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From being just a fringe risk, conflict in the Middle East has become a top worry for investors unsettled by the prospect of a power struggle in Iran and a protracted regional war, with ramifications for everything from global trade to inflation. U.S.-Israel strikes killed Iranian Supreme Leader Ayatollah Ali Khamenei, sowing chaos as Iran struck back at Gulf cities, airlines halted flights, and tankers carrying oil and other products suspended transit through the key Strait of Hormuz.

Why it matters

The uncertainty over what happens next in Iran complicates the outlook for oil prices, which have been rising for weeks but are now hostage to what oil-producing countries do and how passage of tankers through the Middle East is affected, with big implications for inflation worldwide and even the safety of bonds hitherto deemed havens.

The details

Markets are set to be volatile in the coming week, as the fallout from the conflict is not fully priced in. Analysts warn that the market has been complacent, assuming the fallout would be limited, and that a prolonged conflict affecting supply could cause oil prices to jump to around $100, potentially adding 0.6-0.7 percentage points to global inflation.

  • On Saturday, U.S.-Israel strikes killed Iranian Supreme Leader Ayatollah Ali Khamenei.
  • In the aftermath, Iran struck back at Gulf cities, airlines halted flights, and tankers carrying oil and other products suspended transit through the key Strait of Hormuz.

The players

Ayatollah Ali Khamenei

The former Supreme Leader of Iran, who was killed in the U.S.-Israel strikes.

Rong Ren Goh

A portfolio manager in the fixed income team at Eastspring Investments in Singapore.

Charles Myers

The chairman and founder of Signum Global Advisors, a geopolitical investment consulting firm.

William Jackson

The chief emerging markets economist at Capital Economics.

Tariq Dennison

A wealth adviser at Zurich-based GFM Asset Management.

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What they’re saying

“Middle East tail risks have increased. Markets will reprice from geopolitical shock to regime risk shock, prolonged conflict, not just retaliation, unless Iran says it wants to negotiate.”

— Rong Ren Goh, Portfolio Manager, Eastspring Investments (newsmax.com)

“The markets are prepared for a limited surgical strike. What is not priced in is a major strike to decapitate the regime.”

— Charles Myers, Chairman and Founder, Signum Global Advisors (newsmax.com)

“In my view, the market has already been overestimating inflationary forces, so I don't think this will change much. There will be more impact on Europe than U.S. given the closer proximity of Hormuz oil and gas post-Russia.”

— Tariq Dennison, Wealth Adviser, GFM Asset Management (newsmax.com)

What’s next

Analysts are closely watching how the situation in Iran unfolds and how it will impact oil prices, global trade, and inflation. Investors are bracing for increased market volatility in the coming weeks.

The takeaway

The conflict in the Middle East has become a top concern for investors, with the potential to disrupt global trade, drive up inflation, and impact the safety of financial assets previously considered havens. The market's complacency in the face of these geopolitical risks is now being challenged, and investors must reevaluate their assumptions and positioning accordingly.