Why infrastructure may hold up amid Middle East inflation pressures

Rising tensions involving Iran are disrupting key energy and commodity supply routes, feeding through to higher transport and input costs and renewing global inflation pressures. Against this backdrop, infrastructure stands out for its ability to pass through higher costs via regulatory frameworks and long-term contracts, helping protect cash flows even as interest rates and volatility weigh on valuations.

Regulated utilities in North America and Europe, along with pipelines, toll roads and airports, generally benefit from inflation-linked tariffs or cost-recovery mechanisms that support earnings resilience during commodity-driven shocks. Energy infrastructure in particular may see stronger volumes as importers diversify away from the Middle East toward more stable suppliers such as North America.

At the same time, contracted renewables gain a relative advantage as persistently higher fossil-fuel prices enhance their competitiveness and underpin demand for new projects over time.