Strait of Hormuz, War in Iran, and Energy Shock: How This Conflict Could Shake the Global Economy and Our Investments

The war in Iran and tensions in the Strait of Hormuz are threatening oil, inflation, and financial markets. Here’s how this could impact your investments and the global economy.

---

The Strait of Hormuz is not just a maritime passage on a map. It is one of the most sensitive points in the global economy. When a war involves Iran and threatens this corridor, it is not only the Middle East that trembles. Energy markets, supply chains, inflation, interest rates, corporate earnings, and ultimately our portfolios all enter a zone of turbulence.

The risk is enormous because Hormuz concentrates an exceptional share of global energy flows. In 2024, about one-fifth of global oil consumption and one-fifth of global liquefied natural gas trade passed through this route. Asia is particularly exposed, but the impact spreads worldwide, because oil remains a global price. When that price rises sharply, almost everything else becomes more expensive — from transportation to the grocery bill.

What makes the current situation particularly dangerous is that we are no longer dealing with a theoretical threat. The International Monetary Fund has indicated that the de facto closure of Hormuz and damage to regional infrastructure have created a major disruption in the global oil market, with energy, trade, and finance as the main transmission channels. Reuters reported that announced production adjustments remain limited as long as the strait stays disrupted.

The first impact is, of course, energy-related. The longer the conflict lasts, the more oil, gas, maritime transport, and insurance costs rise. Reuters reported early in the conflict that war risk insurance premiums on some tankers increased from around 0.25% of the vessel’s value to as much as 3%, representing millions of dollars per voyage. This extra cost is ultimately paid by someone: the refiner, the transporter, the company, and eventually the consumer.

The second impact is inflationary. A sustained rise in oil acts like a tax on the real economy. Households spend more on fuel, heating, transportation, and food. Companies see their costs rise, especially in energy-intensive sectors such as airlines, transportation, chemicals, plastics, fertilizers, and certain manufacturing industries. The IMF emphasizes that energy-importing economies are the most vulnerable to this type of shock.

But we need to go one step further. This type of inflation shock does not remain isolated. It forces institutions like the Bank of Canada or the Federal Reserve to remain cautious. If inflation rises again, rate cuts are delayed or even canceled. This alone can maintain sustained pressure on real estate, indebted companies, and stock market valuations.

The third impact is macroeconomic. This is where many investors get it wrong. An oil shock is not automatically good for “the stock market” just because energy producers earn more money. Yes, some producers, transporters, and energy-related companies may benefit. But at the global level, excessively high oil prices tend to slow demand, reduce non-energy margins, weaken confidence, and increase the risk of an economic slowdown. The IMF summarizes this dilemma well: higher inflation, but also lower growth.

Another important factor is playing out in the background: China. As the largest importer of Middle Eastern oil, it is directly exposed to any disruption in the Strait of Hormuz. Its decisions — whether using reserves, adjusting demand, or redirecting supply flows — can amplify or mitigate the global shock.

For investors, the right reaction is neither panic nor extreme betting. The first thing to understand is the difference between protection and speculation. Allocating some assets that can better withstand an energy shock can be reasonable. Turning an entire portfolio into a geopolitical bet is far more dangerous.

In such a context, the assets to watch are fairly clear. Integrated oil and gas producers, certain energy infrastructures, specialized transport companies, and possibly commodities themselves can play a hedging role. Gold may also benefit from geopolitical fear and monetary uncertainty. On the other hand, sectors highly sensitive to fuel costs, discretionary consumption, or industrial inputs may suffer more if the shock persists.

To summarize quickly:

Sector	Likely Impact	Rationale
Energy	Positive	Higher prices, stronger margins
Air Transport	Negative	Fuel cost surge
Heavy Industry	Negative	Rising input costs
Defense	Positive	Increased military spending
Technology	Mixed	Pressure via interest rates

But nuance is essential. The biggest trap would be to believe that everything should be sold in favor of oil, gold, or defense stocks. If the conflict eases faster than expected, “crisis assets” can correct sharply. Even now, markets remain extremely headline-driven. Some flows have already partially resumed, showing that the situation is evolving and not purely binary.

So how should one invest intelligently in such an environment?

The first rule is to return to quality. The strongest companies, with solid balance sheets, strong cash flow generation, and pricing power, tend to navigate energy shocks better. They can absorb higher costs or pass them on to customers. Highly leveraged, cyclical, or energy-dependent businesses are far more vulnerable.

The second rule is to maintain measured exposure to real hedges. A reasonable allocation to energy, gold, or commodities can serve a defensive role. The key word is reasonable. A portfolio overly concentrated in “war winners” becomes highly vulnerable to a ceasefire, diplomatic de-escalation, or a faster-than-expected supply recovery.

The third rule is to monitor imported inflation, not just crude oil prices. The real danger often lies in second-order effects: transportation, fertilizers, food, logistics, insurance, and chemicals. These secondary effects are often more persistent than the initial shock.

The fourth rule is to keep cash or flexibility. In geopolitical crises, markets often overreact. Those with liquidity can take advantage of better valuations in high-quality companies temporarily dragged down by general fear.

The fifth rule is not to confuse short term with long term. In the short term, energy and safe-haven assets may outperform. Over the long term, the best opportunities are still high-quality companies purchased at attractive prices during volatility. War can create spectacular moves, but it does not change the fundamental laws of investing.

Concretely, here is what to monitor in the coming weeks: the actual state of traffic through Hormuz, the extent of damage to regional energy infrastructure, OPEC+’s response and the real capacity of alternative routes, the evolution of Brent prices, signs of spillover into gas, fertilizers, food, and shipping costs, and finally, changes in interest rate expectations, which will be a key indicator of how long the shock may last.

The main lesson for investors is simple: the Strait of Hormuz is small on the map, but massive in its consequences. A war involving Iran can quickly turn into a global energy shock, then an inflation shock, and finally a shock to growth and interest rates. This is not the time to be reckless. Nor is it the time to liquidate everything. It is the time to maintain a robust, diversified, and disciplined portfolio, with enough quality to endure and enough flexibility to take advantage of market excesses.

Here is an article that will help you better understand yourself as an investor : Why Every Investor Should Follow a Different Strategy Based on Their Profile (and Why Copying Others Is a Costly Mistake) – The Wealthy Nomad