The ongoing military conflict in the Middle East, that began on 28 February, may have implications for energy markets, shipping, inflation risks and financial conditions, but everything depends on how long it lasts.
To that end, a report by Allianz Research, titled “Conflict in the Middle East: Implications for markets and macro”, which is released by Allianz Trade, has listed three scenarios that would determine the impact the conflict will have on markets
The three scenarios are:
|
Scenario (Probability)
|
Details
|
Oil Brent ($/bbl)*
Peak/end-2026
|
|
Baseline (High) - Short-lived escalation with military exchange
|
War lasts for less than four weeks. US and Iran deal with a transition of power in Iran. Strait of Hormuz blocked for a short while (< two weeks); no destruction of oil industry in the region
|
$85/$70**
|
|
Prolonged conflict (Medium) – Hormuz blocked for longer
|
War lasts longer. No short term smooth transition of power in Iran in the near term
|
$100/$70
|
|
Tail risk (Low) – Long sustained escalation with oil industry destruction in the region
|
War escalates significantly, oil infrastructure in the region as well as US military bases are severely attacked. Hormuz Strait needs to be secured by US Navy on a permanent basis.
|
$130/$80
|
|
Source: Allianz Research/Allianz Trade
*$73 on 28 Feb
** means the oil price increases to 80 $/bbl but falls to $70 at the end of 2026
|
The analysis also covers the implications for the US and EZ: inflation; EUR vs US$; monetary policy, equity market, insolvencies and other metrics.
A declaration of major combat operations
The US has declared “major combat operations”, according to the report, in contrast to the shorter war in June 2025. This translates into different duration and escalation risk, the report added.
The Iranian Revolutionary Guards have warned commercial vessels against travelling through Hormuz. Moreover, as Hormuz is central to global energy flows, “even a partial disruption represents a shock larger than recent Red Sea episodes”, the report stated.
“Early indicators already point to severe operational disruptions: Crossing have dropped by more than 70% following the attacks, with major shipping lines temporarily avoid Hormuz, reassessing routing decisions on a 24-hour basis,” said the report.
Iran’s retaliation against US military infrastructure in the GCC and wider Middle East has also resulted in disrupted air travel and economic activity.
Length of conflict to determine impact
US President Donald Trump indicated four weeks would be needed for sustainable negotiations and a change in Iranian regime leadership. However, the report noted that there are other considerations as well, including Iran’s military capacity to sustain the offensive even as their missile stockpiles remain a “question mark”, and the White House’s willingness to continue the fight.
Although the President has shown indications that “attacks will continue until military objectives are met (without specifics on the objectives)”, the report also said he has offered Iran a path to de-escalation.
The report says that the US administration has an incentive to end the conflict soon as higher oil prices worsening the affortability crisis could mean less support in the November midterm elections.