Iran war shows markets can’t ignore every geopolitical shock

For sheer escalatory potential, look no further than the speed at which the six-day-old war in Iran has drawn in countries across the Middle East, causing the biggest energy shock since Russia’s full-scale invasion of Ukraine in 2022. While the long-term consequences of military action by the United States and Israel against Iran are unpredictable, worst-case scenarios for the global economy and markets have begun to unfold. Although the least important thing about any war is how it affects... AdvertisementUS, Israel war on IranOpinionWorld OpinionNicholas SpiroMacroscope | Iran war shows markets can’t ignore every geopolitical shockInvestors have grown used to brushing off geopolitical threats, but turmoil in the Middle East poses a greater risk to the global economy3-MIN READ3-MINNicholas SpiroPublished: 4:30pm, 5 Mar 2026For sheer escalatory potential, look no further than the speed at which the six-day-old war in Iran has drawn in countries across the Middle East, causing the biggest energy shock since Russia’s full-scale invasion of Ukraine in 2022.While the long-term consequences of military action by the United States and Israel against Iran are unpredictable, worst-case scenarios for the global economy and markets have begun to unfold. Although the least important thing about any war is how it affects financial markets, major conflicts in the oil-rich Gulf are particularly contagious.As Deutsche Bank noted in a report on March 3, “geopolitical events don’t usually cause a sustained market reaction. Indeed, we’ve already seen that in 2026 with Venezuela and Greenland. But the exception is when the geopolitical event has a macro channel to affect markets, and events in Iran are a prime example of that”.AdvertisementIn fact, energy analysts and geopolitical risk experts themselves were caught off guard by the scale and severity of the conflict. In a rare admission by a Wall Street bank that it fundamentally misjudged the threat to energy markets, JPMorgan said, “our base case assumed that an unprecedented disruption [to energy flows] would remain improbable. That assumption failed”.Investors have belatedly come to the realisation that it is what Iran, not the US, does next that will prove more consequential. While US President Donald Trump’s objectives in unleashing war in the Middle East remain unclear, the response of the Iranian regime, whose very survival is at stake, is more discernible.AdvertisementIn an attempt to pressure the US and Israel to halt their bombing campaign, Iran’s endangered theocracy launched retaliatory attacks on the critical energy infrastructure of its regional neighbours. It has also imposed an effective blockade of the Strait of Hormuz, a vital chokepoint through which 30 per cent of global seaborne oil and 20 per cent of liquefied natural gas (LNG) transit each day.AdvertisementSelect VoiceSelect Speed0.8x0.9x1.0x1.1x1.2x1.5x1.75x00:0000:001.00x