Global markets are in a period of increased turmoil and uncertainty! Due to the ongoing tensions in the Middle East following the US and Israeli attacks on Iran and the death of Ali Khamenei, investors are looking for safety – looking for an asset class that is safe.During the night of 27–28 February, the United States and Israel conducted joint airstrikes on Iran as part of “Operation Epic Fury”. Market analysts at the Franklin Templeton Institute say President Trump’s statements openly referring to regime change suggest the confrontation could develop into a protracted campaign rather than a limited exchange.What does the situation mean for the stock markets? energy market (Oil), Gold and other asset classes? Here’s what analysts at the Franklin Templeton Institute had to say:From a market perspective, the main uncertainty is whether the conflict will be limited to direct military involvement or spill over into disruptions affecting energy supplies and logistics networks, which would maintain higher and more persistent risk premiums.The Strait of Hormuz is at the center of ongoing uncertainty from a global market and trade perspective. While a complete blockade would have serious consequences for Iran, the country has the ability to disrupt maritime traffic through tactics such as vessel harassment, seizure, drone activity, cyber operations or the use of proxy forces.
strait of hormuz
He says the most immediate economic impact is expected to be in energy markets, where crude oil and natural gas prices are likely to rise. Analysts believe such actions will keep the geopolitical risk premium at high levels. In 2024, about 20 million barrels per day will pass through the Strait of Hormuz, accounting for about one-fifth of global petroleum liquids consumption. Even a limited intervention – which could lead to delays, re-routing, or isolated seizures – could push prices higher through increased risk perception even before any real shortages emerge.Liquefied natural gas should not be ignored in this context. Qatar has the world’s third-largest LNG export capacity, and approximately one-fifth of global LNG shipments pass through the Strait of Hormuz, with the bulk of Qatari exports. As a result, shipping risks in the region affect gas markets as significantly as oil markets.Read this also America-Israel attack on Iran: What effect will closure of the Strait of Hormuz have on India? ExplainedShipping expenses have already begun to rise, with insurance costs serving as a major driver. Insurers have begun issuing cancellation notices and revising war-risk premiums for trips to the Gulf region. Some routes have reportedly seen premium increases of up to 50%, while increases of more than 60% were recorded on key trade corridors during the earlier stress period. These developments effectively strengthen the supply position even if production levels remain unchanged.The possibility of conflict spreading across the region is increasing. Analysts at the Franklin Templeton Institute believe that in global financial markets, the immediate reaction to such shocks is usually driven by adjustments in risk perception rather than underlying economic changes. “The initial market reaction to this type of event will typically be lower Treasury yields and lower equities – mostly risk-premium reevaluation. The impact on activity/earnings may be delayed and uneven. The US dollar’s reaction is not guaranteed; Analysts at Franklin Templeton Institute say gold benefits while Bitcoin is trading like a risk asset (i.e., below equities), reinforcing that it is generally not a reliable hedge/diversifier in geopolitical downturns.However, they note that experience shows that markets often view geopolitical disruptions as temporary. After an initial increase in the risk premium it is often realized that the overall impact on corporate profitability is limited. The duration of the conflict, developments in shipping and insurance costs, and the final resolution will be more significant than the initial headlines.He says, “We wouldn’t label this a neat buy-the-dip setup just yet – duration, shipping/insurance mechanics, and the endgame matter more than the first headline.”From an investment perspective, analysts say the near-term outlook favors sectors linked to energy markets as well as defense-related industries, as well as companies benefiting from higher shipping and insurance costs. At the same time, caution is needed toward emerging markets that are heavily dependent on energy imports and cyclical sectors that are sensitive to fuel and logistics costs, including airlines and some industrial sectors.He concluded, “For safety, we prefer oil upside/volatility structures and selective gold exposure over broad equity shorts – this path will be driven more by shipping/insurance reality than the new cycle.”
