Oil Shock Threat: What It Means for Investors and Businesses as Markets Open Monday
Global markets are poised for a volatile start on Monday following US President Donald Trump’s announcement that American forces have initiated major combat operations against Iran, significantly heightening tensions in one of the world’s most crucial energy corridors.
Brent crude ended last week near a seven-month peak, trading around $73 per barrel after a 16% increase since January. Energy traders are now anticipating heightened price volatility next week, with several scenarios projecting oil could reach $80 per barrel if supply disruptions occur or credible threats emerge.
Approximately 20% of the world’s traded crude oil and a similar share of liquefied natural gas pass daily through the Strait of Hormuz, totaling around 13 million barrels of oil each day.
Nigel Green, founder and CEO of deVere Group, one of the world’s largest independent financial advisory firms, emphasized that the significant risk in this region will heavily influence asset valuations.
“Energy markets are entering a repricing phase driven by operational risk rather than speculation,” said Green. “When nearly one-fifth of global crude flows transit a single maritime corridor, even a slight chance of disruption demands a higher structural risk premium. Oil prices can surge without a physical halt to flow—rising insurance costs, shipping reroutes, and precautionary stockpiling alone can tighten supply expectations.”
Global spare oil production capacity remains limited, with OPEC’s spare capacity concentrated among a few Gulf producers. Commercial inventories in OECD countries are also below long-term averages. A sustained disruption of just 1 million barrels per day—about 1% of global supply—could alter market balances already factoring in moderate demand growth.
Green warns investors to prepare for rapid reactions across all asset classes. “Equities, bonds, currencies, and commodities will adjust simultaneously. A $10 to $15 rise in crude would push headline inflation higher across the US, Europe, and Asia. Central banks, once expected to consider easing rates this year, will face more complex decisions if energy costs reignite inflation.”
US Treasury yields have already responded to geopolitical tensions, with safe-haven buying compressing long-term yields. Gold prices have risen as investors seek protection against tail risks. The US dollar and Japanese yen are favored defensive assets, while high-beta emerging market currencies may suffer renewed selling pressure if volatility intensifies.
Green adds, “Markets will scrutinize the conflict’s duration and containment. A brief, narrowly focused military operation would likely cause a short-lived spike in oil prices and risk-off moves in equities, followed by stabilization once shipping routes are secure. However, a prolonged conflict threatening the Strait of Hormuz would increase volatility and sustain higher energy prices into the second quarter.”
Asian economies are especially vulnerable due to their reliance on Gulf energy. India, South Korea, and Japan depend heavily on flows through the Strait of Hormuz, with India sourcing nearly half its crude imports there. Elevated oil prices would widen current account deficits, weaken local currencies, and complicate monetary policy.
“Energy importers in Asia will face immediate pressure if crude remains above $80,” Green notes. “Currency depreciation combined with higher fuel costs tightens financial conditions without any central bank rate changes. Equity markets in sectors such as transport, manufacturing, and high-beta areas are at risk of rapid valuation adjustments.”
Corporate earnings forecasts may also be impacted. Airlines, logistics firms, and industrial manufacturers are particularly sensitive to sustained fuel cost rises. Without the ability to pass these costs onto consumers, profit margins could contract.
Green concludes, “Markets open next week confronting significant geopolitical risk amid a fragile macroeconomic environment. Oil prices, shipping insurance rates, sovereign bond yields, and volatility indexes will be key early indicators. Investors should expect sharp intraday swings, strong cross-asset correlations, and a rigorous test of risk appetite. The conflict’s trajectory will determine whether this remains a contained energy premium or evolves into broader inflationary and economic growth challenges worldwide.”
Special Analysis by Omanet | Navigate Oman’s Market
The escalating conflict in the Strait of Hormuz, a critical energy corridor near Oman, poses significant geopolitical risk that could sharply drive up oil prices and energy costs, impacting global markets and inflation. For businesses in Oman, this creates both a potential opportunity in energy sector growth and a risk of supply chain disruption and cost inflation. Smart investors and entrepreneurs should monitor supply flow stability closely, hedge against volatility, and consider strategic positioning in energy and logistics sectors to capitalize on shifting market dynamics.
