Investment Case

The recent escalation of the conflict between the United States, Israel, and Iran has created significant uncertainty in global financial markets. Military strikes, retaliatory attacks, and rising tensions in the Middle East have increased geopolitical risk. As a result, investors and traders are turning to traditional safe-haven assets such as oil and gold. These commodities are once again seen as key tools to hedge against volatility and economic uncertainty.

The conflict intensified after coordinated military strikes by the United States and Israel on Iranian targets in late February 2026. Iran responded with missile and drone attacks across the region, including strikes toward U.S. bases and Israeli territory. This escalation has spread instability throughout the Middle East and raised concerns about a wider regional war.

One of the biggest concerns for global markets is the Strait of Hormuz. This narrow waterway between Iran and the Gulf states is one of the most important energy shipping routes in the world. Around 20% of the global oil supply passes through this strait every day. Any threat to this route can cause major disruptions to energy markets.

During the current crisis, shipping activity in the Strait of Hormuz has dropped sharply. Tankers and cargo ships have slowed or stopped operations due to safety concerns and rising insurance costs. Some shipping companies have suspended operations in the area to avoid potential attacks.

Because of these risks, oil prices have risen quickly. Brent crude prices surged by more than 10% in the early days of the conflict and moved above $80 per barrel. Analysts warn that prices could climb even higher if the conflict continues or if the Strait of Hormuz is fully blocked.

The rise in oil prices shows how sensitive the global energy market is to geopolitical tensions. Many countries, especially in Asia, rely heavily on oil imports from the Middle East. Any disruption in supply can affect transportation, manufacturing, and electricity generation. This is why energy markets react so strongly when conflicts threaten important trade routes.

At the same time, gold has regained its role as a safe-haven asset. During periods of political instability or financial uncertainty, investors often buy gold to protect their wealth. Gold is considered a stable store of value because it is not directly tied to any government or currency. As geopolitical risks increase, demand for gold usually rises.

The financial markets in the Gulf region have also felt the pressure. In response to the heightened tensions and security concerns, trading activity in some regional markets slowed significantly. The United Arab Emirates even halted trading for two days to stabilise its financial system and prevent panic selling.

These developments highlight the concept of “geopolitical kinetic risk.” This term refers to situations where military actions and physical conflict directly impact economic systems, trade routes, and financial markets. Unlike political disagreements or diplomatic tensions, kinetic risk involves real military activity that can disrupt global supply chains.

For investors, this environment creates uncertainty but also opportunities. Energy commodities such as oil become important hedges against supply disruptions, while gold serves as protection against market volatility. These assets are likely to stay in focus as long as geopolitical tensions remain high.

In conclusion, the escalating US-Israel-Iran conflict has once again demonstrated how geopolitical events can shape global markets. With the Strait of Hormuz under threat and regional tensions rising, oil and gold have returned to the spotlight as the primary volatility hedges for investors worldwide.