If the start of 2026 posed numerous questions for investors, the end of the first quarter has done little to answer them.
The obvious change is the situation in the Persian Gulf. The joint Israeli-U.S. attack on Iran has seriously de-stabilised the region, even drawing the tourist meccas of Dubai and Abu Dhabi into the fray. The U.S. president’s assertion that the conflict was ‘won’ looks even more premature now than it did then. It is wholly obvious that Iran’s resistance will be asymmetric because it cannot compete with its enemies’ superior firepower. However, not being able to compete should not be interpreted as being unable to inflict damage; both militarily and via energy prices. Geology has given Iran the gift of oil while geography has yielded significant influence over the Straits of Hormuz. One might have surmised that economic warfare was always going to be Iran’s most potent weapon but perhaps the problem with telling Mr Trump what he wants to hear rather than what he doesn’t, is that reality cares little; it will impose itself regardless.
At the present time, oil is approximately $100 a barrel which has obvious implications for consumer demand, inflation and the path of interest rates. Until late February, cheaper borrowing was almost assured but now, unless central banks are to completely ignore inflation targets, the opposite looks more likely.
