02.03.26 - The Iran war - stress test
The Iran war has entered its fourth day and the conflict is clearly broadening. Joint U.S. and Israeli airstrikes against Iran continue, while US President Donald Trump indicated that the bombing campaign could last for weeks and again called on Tehran to capitulate. Iran’s leadership has ruled out negotiations and continues retaliatory missile and drone strikes across the region.
Attacks have affected Israel and several Gulf states, including the United Arab Emirates, Bahrain, Qatar, Saudi Arabia and Kuwait. At the same time, Israeli operations extend toward neighboring countries such as Jordan and Lebanon. Practically, most of the Middle East is now directly or indirectly involved.
The most market-relevant development came in the evening: an Iranian commander declared the Strait of Hormuz officially closed. This waterway is the most critical global energy chokepoint. Roughly 20% of global oil supply and a significant portion of LNG exports pass through this narrow corridor. While much of the flow is directed toward Asia, Europe remains materially exposed to Middle Eastern energy supplies. A prolonged disruption would have direct macro consequences.
Markets: nervous but no panic
Equities: Broadly lower, but no panic selling. US markets managed to rebound intraday.
Bonds: Falling first, yields rose on renewed inflation concerns rather than pure safe-haven demand. The U.S. 10-year trades around 4.04%, reflecting fears of a potential energy-driven inflation impulse.
Currencies: The USD strengthened significantly, typical in early-stage geopolitical stress environments. The Swiss franc, against a normal scenario, weakened as Swiss National Bank announced potential currency intervention
Commodities: old moved higher and ended around USD 5’300/oz after testing USD 5’400 intraday. Silver was extremely volatile, briefly reaching USD 96/oz before falling back below USD 90/oz. Energy markets remain the key transmission channel to watch. Oil jumped above USD 70/barrel
Cryptos: Rebounded markedly, with Bitcoin back near USD 69k - rotation from silver.
Volatility: the VIX spiked above 25 before easing toward 21 — stress, but not disorder.
My View: Is this the moment to buy? Not yet.
While the first shock in geopolitical events is often the most violent, this conflict carries a meaningful risk of worsening before stabilizing. The decisive factor is not the military headlines themselves, but whether energy flows through Hormuz are materially disrupted.
If the closure proves rhetorical or very short-lived, markets may digest the situation relatively quickly. However, should shipping volumes decline meaningfully and oil prices spike sharply, the macro impact could become significant. Higher energy prices would feed directly into global inflation, restrict central banks’ flexibility, and increase the probability of stagflation, weaker growth combined with rising prices.
OPEC+ has agreed to increase production quotas by 206,000 barrels per day in April. This is supportive at the margin, but small compared to a serious disruption of a route handling nearly one-fifth of global oil supply.
The key questions now are straightforward: How long will hostilities continue? Will the Strait of Hormuz remain effectively closed? How far is Iran willing — and able — to escalate militarily? Does diplomacy re-enter the picture, or does the conflict broaden further?
President Trump’s indication that additional troops could be sent to the region is a clear signal that this situation may not resolve quickly.
Markets currently appear to price a limited-duration scenario: partial de-escalation and a relatively fast normalization of energy flows, allowing risk assets to stabilize after heightened volatility.
The bear case involves sustained disruption in Hormuz combined with ongoing regional strikes, leading to a renewed oil spike, re-accelerating inflation, lower equity valuations and widening credit spreads.
The worst case would be a severe and prolonged supply shock — triggering a global growth slowdown alongside an inflation surge, creating a policy dilemma and increasing recession risk.
At this stage, I tend toward the bear case. Therefore I see markets to re-rate to lower levels.
This is a volatility regime, not a capitulation phase. Patience and optionality remain critical. The opportunity to add risk will emerge with clarity, not during escalation.
Become a member to access more valuable market updates like this
