By Thierry Hasse, Chief Investment Officer
Elevage Partners | March 25, 2026
The conflict that erupted on Feb. 28, when the United States and Israel launched military strikes against Iran, has rapidly evolved from a regional crisis into what may become one of the most consequential energy supply shocks in modern history.
With military action now in its fourth week, markets are no longer reacting to a temporary disruption. Investors are now confronting a more difficult question: What if this war is not short-lived? What if the interruption to global energy flows proves structural and prolonged?
The Strait of Hormuz: A Global Constraint
Since the onset of hostilities, tanker traffic has been reduced sharply, with flows falling from approximately 20 million barrels per day to a fraction of that level. The International Energy Agency (IEA) called it “the largest supply disruption in the history of the global oil market.” (Source: IEA Oil Market Report, March 2026.)
Major producers in the Persian Gulf have been forced to cut output by an estimated 10 million barrels per day, while Qatar’s Ras Laffan Industrial City, home to the world’s largest LNG export facility, suffered extensive damage and declared force majeure on its entire output (Source: Bloomberg; CNBC).
Emergency reserve releases, though historically large at 400 million barrels, cover only a matter of days at current consumption levels. They buy time. They do not replace the flow.
Markets Respond: Energy, Equities and Rates
Oil prices have moved sharply and with considerable volatility. Brent crude, which stood near $80 per barrel before the conflict, surged above $119 in early March, then dropped roughly 11% Monday (March 23) to $99.54 as markets responded to reports of U.S.–Iran talks, only to rebound 4.6% to $104.49 on Tuesday (March 24) after Iran’s Foreign Ministry denied any negotiations had taken place (Source: Barron’s). With oil still up roughly 30% from pre-conflict levels, the range itself tells a story: markets are not settled on an outcome. Natural gas markets have followed, and the disruption at Ras Laffan has taken roughly one-third of global helium supply off the market, creating immediate challenges for semiconductor manufacturers (Source: CNBC; Fortune).
Equity markets are beginning to reflect this shift. The S&P 500 has declined close to 7% from pre-conflict levels and has closed below its 200-day moving average for multiple consecutive sessions, a threshold analysts describe as the line between a bull market correction and a potential bear market entry (Source: FinancialContent). The Nasdaq Composite, which hit a closing high of 23,857.45 on Jan. 28, has fallen approximately 8.8% to Tuesday’s close of 21,761.89 (Source: CNBC). Technology and growth-oriented sectors, more sensitive to rates and energy input costs, have led the decline. Defense manufacturers and integrated energy companies have been among the clearer beneficiaries.
In fixed income, yields have moved higher rather than lower. The 10-year Treasury yield spiked to 4.39%, its highest level since July 2025, having risen approximately 46 basis points since the conflict began (Source: Wolf Street). Markets are pricing inflation risk, not a flight to safety.
The Federal Reserve held rates unchanged at 3.5% to 3.75% and, for the first time, explicitly acknowledged the conflict in its statement, noting that “the implications of developments in the Middle East for the U.S. economy are uncertain.” (Source: CNBC; Charles Schwab.) In our assessment, rate cuts that markets had been counting on through much of early 2026 now appear off the table for the foreseeable future.
What We Are Watching
Three variables will be particularly consequential in the weeks ahead:
- Duration of disruption. Markets still appear to be pricing a temporary event. A diplomatic resolution would likely bring a meaningful reversal in energy prices and a relief rally across most asset classes. But even in an optimistic scenario, analysts at Macquarie Group estimate a price floor of $85 to $90 and expect Brent to drift naturally back toward $110 until the Strait of Hormuz is fully restored. Each additional week of closure raises the risk of longer-term structural damage.
- Infrastructure integrity. A temporary shipping disruption is fundamentally different from physical damage to production and refining capacity, which can take months or longer to restore. The IEA has now confirmed that more than 40 energy assets across the region have been severely damaged, a figure that, if accurate, extends the recovery timeline considerably beyond what markets may currently be pricing.
- Central bank response. Persistently elevated energy prices would force policymakers to navigate the balance between inflation control and economic support, raising the risk of a stagflationary backdrop.
Closing Perspective
Not all risks can be diversified away during periods of sudden market disruptions, and this environment is a reminder of that.
The portfolios we manage were not built for any particular market scenario. They were built around structural economic forces we believe are durable, and around each client’s WHY: the goals, values and priorities that do not shift with a news cycle. That is what allows us to hold through uncertainty rather than react to it.
We don’t need to predict every outcome. We need to be prepared for a range of them. At Elevage Partners, we anticipate, we prepare.