Markets and Missiles: What the Israel/Iran conflict signals for the global economy
Peter McGahan
Monday 30th June, 2025.
IN a world where financial markets used to melt at every puff of Middle Eastern smoke, it’s remarkable how composed they’ve become, even as drones and missiles whizzed between Iran and Israel.
Our investment team have been here many times and while this one is very, very different in terms of the potential, or some might say, inevitable world war, a steady hand at the tiller is required. It’s the calm thinking which ensures we look through noise and panic.
Not long ago, such an escalation would have had oil prices soaring, traders scrambling, and central banks freaking out. But when Israel struck Iran, Brent crude futures prices did spike – 7 per cent in the day. Brent crude flirted around $78 (intraday high of 13 per cent). Yet by the time the dust settled, it drifted back down to around $73, even lower than when the hostilities began.
So, what’s changed?
Well, for one, traders now demand more than just loud noises. Gone are the days of knee-jerk panic. Today, the market wants substance: real, sustained disruption to global oil supply, not sabre-rattling or symbolic fireworks, which is how they saw it.
And while the noise was indeed thunderous, the fundamentals held. OPEC+ still sits on around four million barrels per day of spare capacity. The US remains the world’s top producer, with Brazil and Guyana queuing up to fill any gaps. The cupboard is well stocked.
Most telling, though, is Iran’s own restraint. It could have gone for the jugular - the Strait of Hormuz. That narrow passage handles one-fifth of the world’s oil. Shut it down, and the ripple effect would be global. Tehran held back. Why? Partly because it sends 96 per cent of its oil through that very chokepoint, mostly to China, an ally. Closing it would be like hiding a fish in a tree so it didn’t drown in the flood.
That’s the tension at the heart of this crisis. On one side, a pattern of provocation. On the other, a calculated, response. Iran showed a kind of economic rationality, so
markets have adapted their interpretation of such events, now pricing in a higher threshold for sustained disruption.
Investors have clocked this shift. Oil forecasts from major analysts still paint scenarios where prices could spike to $90 or even beyond $100 per barrel in worst-case situations. But they also show how quickly those premiums fall back once the smoke clears, both literally and metaphorically.
So, where’s the danger?
Well, while the Strait remains open, the feeling of instability is enough to drive up shipping insurance costs and freight rates. Think of it as geopolitical turbulence: not enough to ground the flight, but enough to spill your freshly poured tea all over your lap.
Sectors like aviation, shipping, and logistics are already feeling the pinch. Maersk share price down 7.5 per cent from its June 13 price. Airlines rerouted flights, adding to fuel costs and schedules. Some oil-dependent industries are bracing for squeezes if tensions flare again (it would be wise to expect that).
The so-called ceasefire may well be a pause button, not a peace deal. We’ll see. There’s a suspicion that regrouping is underway, so think geopolitical chess. With internal political pressures in Israel, including Netanyahu’s cross examination this week, it's easy to wonder whether he will plead further 'pressing matters of state', in other words, more attacks, to create additional delay. The outcome of that trial will be momentous, one way or another.
What we’re witnessing isn’t a one-off skirmish. It’s a signal. A reminder that while the global economy might be shrugging off each flare-up, it does so with crossed fingers. Traders have matured, yes, but the game is still perilous.
For long-term investors, this is a moment not for panic, but for preparation. Diversify. Hedge. Don’t overreact, but don’t sleepwalk by staying in overvalued stocks either. The markets may be calmer now, but calm is not the same as safe.
Amid the noise, technology stocks continued to climb, powered by AI and innovation. That, perhaps, is the new balance: risk on one side, resilience on the other.
The takeaway? Don’t confuse any quiet with certainty. The Middle East is still a powder keg, and the global economy still runs on oil. This time, the fuse didn’t light. But there’s always another match.
Remember, US trade taxes pose a far bigger threat to shipping volumes than events in the Gulf.
If you have an investment query, please call 01872 222422 or email info@wwfp.net or visit us on www.wwfp.net
Peter McGahan is the Chief Executive Officer of independent financial advisers Worldwide Financial Planning. Worldwide Financial Planning is authorised and regulated by the Financial Conduct Authority.
