BlackRock has stated that the duration of the Middle East conflict and its subsequent impact on supply chains are currently the primary concerns. While short-term conditions may deteriorate, economic and political pressures are expected to lead to the reopening of the Strait of Hormuz within weeks. Should the conflict reach a clear resolution, risk asset prices are projected to recover within 6 to 12 months. The firm remains optimistic about U.S. stocks benefiting from the AI theme and favors hard currency bonds in emerging markets, particularly those tied to commodity exporters such as Brazil.
According to BlackRock, soaring energy prices resulting from the conflict affect regions unevenly, with North Asia being especially vulnerable due to key differences between oil and liquefied natural gas (LNG). While oil can be rerouted via alternative shipping lanes, LNG transport is heavily dependent on regional infrastructure, and North Asia relies on imports passing through the Strait of Hormuz for both. For instance, Japan imports approximately 70%–90% of its oil and 10%–15% of its LNG via this route. Some Asian nations are stockpiling energy, which could tighten supplies further and amplify market volatility.
Europe also faces significant risks; a months-long closure of the strait could expose the region to supply shocks twice as severe as those in the United States. Only about 4%–8% of U.S. oil imports transit the Strait of Hormuz, compared to 20%–45% for major European economies such as France, Italy, and Germany. This disparity is already reflected in market performance, with European and Asian equities declining more sharply than U.S. stocks.
However, the reverse side of this feedback loop is emerging: economic and political pressures stemming from these disruptions may encourage de-escalation. This was evident in intraday trading last Monday, when oil prices experienced one of their most volatile sessions after former U.S. President Donald Trump suggested the war could end "soon." As Iran intensified attacks on energy shipping and infrastructure, Brent crude prices climbed back toward $100 per barrel. Although Iran has gained leverage by restricting maritime traffic, the resulting economic strain may also motivate it to seek conflict resolution. Growing domestic dissatisfaction in the U.S. over high natural gas prices could similarly push toward stabilization.
BlackRock estimates that if current oil prices persist for six months, global economic growth would slow significantly and inflation would rise. The firm notes that few assets offer full protection against recent supply shocks. While equities have fallen, government bonds and gold have not served as reliable hedges. This is because, amid persistent inflation and high debt levels, investors demand greater compensation for the risks of holding long-term bonds. Recent supply disruptions have intensified this trend, reversing earlier expectations of slowing inflation and adding upward pressure to bond yields.
