Investors are on high alert as tensions escalate following weekend attacks on Iran, with anticipation growing around the potential impact on the oil market and global energy flows. At the center of this worry is the Strait of Hormuz, a critical maritime passage through which around 13 million barrels of crude oil daily are transported. This represents about 20% to 30% of the world’s oil supply. Reports have emerged indicating Iran’s intentions to close the strait, a scenario that could lead to severe disruptions and significantly higher crude prices when markets reopen.
Barclays analysts have expressed concerns that oil markets could face their “worst fears” as Brent crude prices may surge to $100 per barrel by Monday, representing an alarming 37% increase from Friday’s closing price of $67.02. The bank emphasized the magnitude of the potential impact on oil markets, suggesting that the spike could reverberate through the economy.
The oil market had already been on edge, grappling with the fallout from an attack on Venezuela and escalating tensions with Iran. Crude prices have experienced steady growth in 2026 after a downturn the previous year, with Brent climbing 20% year-to-date. A rapid increase in energy prices might further fuel inflation expectations and subsequently affect both business activity and consumer spending. Deutsche Bank has cautioned that such an “oil shock” poses a significant risk to the economic outlook for 2026. Their analysis suggested that heightened inflation risks could emerge from a positive supply shock to oil prices.
Goldman Sachs has warned that a serious conflict involving Iran could serve as a substantial economic headwind, with the likelihood of a recession increasing dramatically. In a prior analysis, Goldman projected that Brent prices could skyrocket to $110 per barrel should the Strait of Hormuz be closed for an extended period.
Historically, conflicts that jeopardize oil supplies have led to short-term rallies in both energy and defense stocks. The iShares US Aerospace & Defense ETF has already risen by 14% in 2026, boosted by heightened military tensions, while the iShares S&P Global Energy ETF has gained 24% amid concerns about potential global supply disruptions.
As geopolitical tensions escalate, assets traditionally considered safe havens, such as gold, could see boosted demand. Gold’s recent surge past $5,000 an ounce reflects its appeal during periods of conflict, and the situation with Iran might provide an additional catalyst for its price to climb further. Additionally, a general risk-off sentiment may drive Treasury yields down.
While stock markets may react negatively to the unfolding news, historical patterns suggest that a prolonged adverse reaction is not guaranteed. Market veteran Ed Yardeni highlighted that geopolitical events often lead to fleeting market reactions. He noted that the S&P 500 Energy sector might initially rally on Monday, only to fade later in the day, indicating the potential for even an adverse market response to later turn into a rally.
However, Barclays analysts have advised caution, suggesting that buying the dip may not be prudent under current circumstances. They reminded investors that while markets had previously shown resilience amid the bombing of Iran’s nuclear facilities, a prolonged conflict could lead to a more significant downturn. If the S&P 500 were to drop sharply, it might eventually present a buying opportunity, but for now, they advised holding off.
