Geopolitics

Disruptions through the Strait of Hormuz linked to the ongoing conflict with Iran have constrained access to about 20% of global oil and natural gas supplies, pushing crude above $90 a barrel this week. The rebound in energy costs is adding to inflation pressures at a time when U.S. inflation remains stubbornly above the Federal Reserve’s 2% target. Fed Chair Warsh reiterated the 2% commitment but warned the economy has entered a new phase of inflation and that further action may be needed if underlying trends do not improve.

Japanese stocks fell sharply on Wednesday after renewed U.S.-Iran military strikes pushed oil prices higher and stoked worries about economic growth. The Nikkei 225 ended down 2.95% at 64,254.56, while the Topix fell 2.37%. Higher government bond yields weighed on growth shares, with tech and chip-related names under pressure and SoftBank Group down more than 6%. Defensive drugmakers bucked the decline and rose.

After the U.S. targeted Iranian tankers, the risk of supply disruptions in the Strait of Hormuz increased, pushing WTI and Brent to $91.05 and $95.68, respectively. Both benchmarks have risen by about $5 since hostilities between the two countries resumed. API data showed U.S. crude inventories fell by 2.6 million barrels, while another 3.1 million barrels were released from the Strategic Petroleum Reserve to support commercial stocks.

Indian equities sold off as US-Iran tensions intensified, pushing the Sensex down 700 points and dragging the Nifty lower, with most sector indices falling more than 1%. Brent crude climbed to $91-94 a barrel for its sharpest rise in over a year after the US and Iran returned to direct military exchanges and hopes of reopening the Strait of Hormuz collapsed. Analysts said the impact on Indian stocks may stay limited if oil does not break above $95, but warned that every $10 rise in average oil prices typically widens India’s current account deficit by 30 to 40 basis points of GDP and adds to inflation.

Russia’s invasion of Ukraine led to the collapse of a UN-backed Black Sea grain initiative in July 2023, and Russia and Ukraine together account for 27.4% of global wheat exports, setting the stage for a sharp rise in wheat prices. A separate shock has come from the US-Iran war that began on February 28, which lifted average Brent spot prices in March-August to $98 a barrel, up 41% from March-August 2025. The combined pressures are worsening food and energy strains across the Global South, including major energy importers such as India.

The US military struck about 100 Iranian targets on Tuesday, focusing on radar, mine-laying and anti-ship missile capabilities to weaken Tehran’s long-standing ability to threaten shipping through the Strait of Hormuz. Officials said the operation could reduce the threat level for at least a month. About 40 vessels transited the strait safely on the day of the strikes. Markets judged that near-term supply disruption risks have eased.

US Central Command said it struck Iranian air-defence and naval facilities in response to an attempted mining incident in the Strait of Hormuz. Crude prices have climbed through the week, reaching their highest level in more than a month, as markets price in a prolonged disruption to exports rather than a quick de-escalation. Traders are focusing on how the standoff may unfold, including the scale of a US naval blockade around Iranian ports and the risk of further mining attempts in the strait.

The United States and Iran reported new reciprocal attacks near the Strait of Hormuz. President Donald Trump said the U.S. military targeted Iranian sites in the area. Iran said it also took action against U.S. targets. The escalation has raised concerns over threats to a key oil shipping route, lifting fears of supply disruptions and boosting safe-haven demand.

U.S. Central Command confirmed that American forces launched a new round of strikes on Tuesday against targets linked to Iran’s Islamic Revolutionary Guard Corps. The action followed recent Iranian threats to attack commercial vessels near the Strait of Hormuz and hostile acts against U.S. personnel, including a missile attack in Jordan. After President Donald Trump ordered the operation, regional tensions escalated sharply, heightening risks for global shipping security and energy markets.

The United States launched a new round of air strikes on Iran on Tuesday, dashing hopes the conflict would not expand after direct exchanges over the weekend. Two oil tankers were hit on Monday while departing the Strait of Hormuz, a key global oil route that Iran has effectively closed to shipping. Brent crude futures briefly surged almost 4% after the reports.