Global markets are heading into a high-risk open on Monday after US President Donald Trump confirmed that American forces have begun major combat operations against Iran, dramatically escalating tensions across one of the world’s most systemically important energy corridors.
Brent crude closed the week near seven-month highs around $73 per barrel after climbing roughly 16% since the start of the year.
Energy traders are now modelling significantly wider ranges for next week, with several scenarios pointing toward $80 oil if supply flows face disruption or credible threat.
Roughly 20% of globally traded crude and a similar proportion of liquefied natural gas passes through the Strait of Hormuz each day, equating to around 13 million barrels of oil moving through the channel daily.
Nigel Green, the founder and chief executive of deVere Group, one of the world’s largest independent financial advisory organizations, said the scale of risk embedded in that geography will dominate asset pricing.
"Energy markets are entering a repricing phase driven by operational risk rather than speculation. When close to one fifth of global crude flows transit a single maritime corridor, even a marginal probability of disruption demands a higher structural risk premium," he stated.
"Oil doesn’t need to be physically halted for prices to move sharply. Insurance costs, shipping reroutes and precautionary stockpiling alone can tighten supply expectations," he added.
According to him, spare production capacity globally remains limited. Opec spare capacity is concentrated in a handful of Gulf producers, while commercial inventories across OECD economies sit below long-term averages.
A sustained disruption of even 1 million barrels per day would represent roughly 1% of global supply, enough to shift balances in a market already priced for moderate growth in demand.
The deVere CEO pointed out that investors must prepare for rapid cross-asset transmission. "Equities, bonds, currencies and commodities will adjust simultaneously. A $10 to $15 move higher in crude would place renewed upward pressure on headline inflation across the US, Europe and Asia," he explained.
"Central banks that were expected to consider rate reductions later this year will face a more complicated calculus if energy feeds back into consumer prices and inflation expectations," he noted.
US Treasury yields have already shown sensitivity to geopolitical risk, with safe-haven flows compressing longer-dated yields in recent sessions. Gold has strengthened as investors hedge against tail risk.
The US dollar and Japanese yen are attracting defensive allocations, while high-beta emerging market currencies are likely to face renewed selling pressure if volatility accelerates, said the top expert.
Green said markets will focus on duration and containment. "A short, tightly defined military campaign would likely trigger a spike in oil and a brief risk-off move in equities, followed by stabilisation once shipping routes are confirmed secure," he noted.