Energy prices surge as wider Gulf region drawn into conflict

Global markets sold off sharply this week as a sudden escalation of conflict in the Middle East drove a surge in energy prices and forced investors to reassess growth and inflation risks. Equities in Europe and the US declined while government bond yields, particularly in Europe, moved higher as traders scaled back expectations for interest rate cuts amid a renewed energy shock. The effective closure of the Strait of Hormuz has amplified concerns over oil and gas supply, raising the risk of stagflationary pressures at a time when many economies are still grappling with the fallout from Russia’s invasion of Ukraine.

For now, contagion beyond the region appears contained, though weaker emerging markets such as Egypt, Pakistan and Turkey could come under strain if disruptions persist. Advisors will need to balance historically supportive effects of higher crude prices on GCC economies against rising regional risk premiums and elevated volatility across long‑duration assets.