20.04.2026 - Re-Escalation

The Middle East conflict is back at the center of market attention, with the Strait of Hormuz remaining the critical pressure point.

Tensions are rising again. Both sides reportedly fired on vessels attempting to transit the strait, while the US intervened directly, taking control of tankers and cargo ships trying to pass through. What was framed as a temporary stabilization phase is clearly starting to unravel.

The ceasefire agreement is set to expire in just two days. At this stage, there are no clear signals that an extension or sustainable resolution is in place.

Markets: oil prices move higher on renewed supply fears, equities broadly lower

My View: Markets are once again trading on hope, as equities should trade much lower. But the underlying reality is shifting.

The focus should not be on whether a ceasefire headline gets extended for a few more days. The real issue is the functionality of the Strait of Hormuz. As long as transit remains disrupted or controlled, the global energy supply is effectively constrained.

We are now seeing the first signs of what I have been highlighting: escalation risk was never off the table, it was just temporarily paused. Both sides are still too far apart to reach a meaningful deal, and that is exactly what markets continue to underestimate.

If the ceasefire expires without a credible framework, the situation can deteriorate quickly. Oil becomes the key transmission channel into inflation expectations, central bank policy, and ultimately equity valuations.

Markets still appear complacent relative to the magnitude of this risk.

This remains a highly headline-driven environment, but with increasingly asymmetric downside if the situation escalates further.

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