Six months after the U.S. and Israel launched strikes on Iran, the Middle East conflict has reshaped global financial markets, with energy prices elevated, safe-haven assets volatile and regional economies under strain.
Brent crude oil prices, which briefly exceeded $120 in April, have averaged about $90 in 2026, up from roughly $70 in 2025. Supply disruptions from the Strait of Hormuz, Russian refinery outages in Ukraine and lost Gulf export flows pushed diesel prices higher, though jet fuel markets stabilized as U.S. refinery output and exports surged. Gold, which fell nearly 25% between the start of the war and July, has since rebounded more than 15% amid renewed concerns over dollar debasement. The metal has more than tripled in price since 2022, when Western powers froze Russia’s central bank reserves following its invasion of Ukraine.
Global equities have largely shrugged off the conflict. The MSCI World Stocks Index, covering 47 developed and emerging markets, hit a record $105 trillion in August, up nearly $7 trillion, or 9%, since the war began. Fidelity analyst Pranav Aggarwal noted that global stocks are up 14% year-to-date, suggesting investors remain optimistic about a resolution in 2026. "Equities are actually having a pretty good year," Aggarwal said. "They’re up 14% or so for the year. If we are expecting 8% to 9% in a standard year, 14% up till August is pretty good."
The conflict’s impact has varied sharply by region. Gulf markets underperformed, with Qatar and UAE equities down around 14%, a gap of more than 20 percentage points versus the MSCI World. In Dubai, property sales plummeted an estimated 70% to 80%, while Saudi Arabia’s exports shrank 10% between the first and second quarters. Qatar’s economy is expected to contract nearly 30% this year due to damage to the Ras Laffan gas facility, according to Oxford Economics. The cost of insuring Qatar and UAE debt against default has risen, with Bahrain’s credit default swap prices up almost 40% amid higher indebtedness.
Safe-haven demand has been mixed. The U.S. dollar strengthened 1.4% against a basket of major currencies since the war began, partly reflecting persistent weakness in the Japanese yen. U.S. Treasuries lost 3.5% on a total return basis, as higher inflation dashed expectations of Federal Reserve rate cuts under new chair Kevin Warsh and amid Washington’s surprise debt buyback plans.
Food prices reached a more than three-year high in July, according to the U.N. Food and Agriculture Organization, driven by the Strait of Hormuz closure, a strong El Niño and grain shipment disruptions linked to the war in Ukraine. JPMorgan estimates a severe El Niño could lift global food inflation by about 0.7% at its peak, with the greatest impact expected in Asia, Latin America and Africa.
