Investors weigh knock-on effects of Iran conflict

Escalating conflict in the Gulf has driven sharp moves across energy markets, with oil and gas prices surging as key regional facilities come under attack and flows through the Strait of Hormuz are disrupted. These higher input costs are now feeding into a wider range of commodities, from fertilizers and plastics to aluminum, raising concerns about a broader inflation shock that could weigh on global growth and corporate margins. Equity markets have softened in response, while government bond yields have moved higher as investors reassess inflation risks and central bank policy paths.

For central banks such as the Bank of England, the narrative has shifted quickly from disinflation to renewed vigilance on price pressures, with markets now pricing in rate hikes rather than cuts. For investors, portfolio positioning will hinge on how long the conflict persists and whether energy supply routes remain constrained for weeks or for months.