Global Markets React to Rising Tensions Amidst Geopolitical Uncertainty

Global Energy Markets in Turmoil Amid Iran-Israel-US Conflict

Key Findings

• Brent crude prices have surged, potentially breaching $100 per barrel if the conflict persists and supply routes remain compromised
• 20 million barrels of crude oil, condensates, and refined petroleum products pass through the Strait of Hormuz every day, representing 20-26% of the global oil supply
• Tanker freight rates have more than tripled since the start of the year, with benchmark rates for very large crude carriers sailing from the Middle East to China increasing significantly
• Liquefied natural gas (LNG) market is vulnerable due to Qatar's reliance on the Strait of Hormuz for exports, accounting for 20% of global LNG shipping
• Liquefied petroleum gas (LPG) market is also at risk due to Iran's significant LPG supply to China, creating potential demand pressures across global LPG markets

Energy Market Impact

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• Goldman Sachs estimates that losing 1 million barrels a day of Iranian exports for a sustained period would add approximately $8 to oil prices
• Rystad Energy predicts that a wider conflict could push prices up by $10 to $15 per barrel
• Tortoise Capital estimates that the Hormuz disruption scenario could push prices above $100

Financial Market Reaction

• Gold prices are expected to climb further as investors seek refuge from uncertainty, with a potential run toward the $100 level
• Silver prices are being watched closely for a potential run toward the $100 level
• Swiss franc has strengthened, while United States Treasury yields have fallen amid rising bond demand
• Bitcoin has shed more than a quarter of its value in two months and fallen further on the news
• Equity markets have reacted with predictable anxiety, with the Dow Jones Industrial Average, S&P 500, and Nasdaq all registering losses in the days leading up to and immediately following the strikes
• Defence stocks are expected to find buyers, while airlines face a double blow from suspended routes and rising jet fuel costs.