Oil shock: geopolitics and us markets face a new reality
The Trump administration’s escalating conflict with Iran has triggered a global energy crisis, sending US oil and gas production soaring as exporters capitalize on the disruption at the Strait of Hormuz. But this scramble for market share isn’t a victory for American power – it’s a stark warning about Europe’s vulnerability and its status as a ‘price taker’ in global commodities.
A continent left exposed
As Europe watches helplessly, major investment firms like BlackRock and Barclays are increasingly seeing a significant weakness and heightened risk in US assets. Emmanuel Cau, head of equity strategy at Barclays, bluntly stated on CNBC that ‘Europe is difficult to be as optimistic about as before’. Helen Jewell, a senior investment strategist at BlackRock, echoed this sentiment, noting to the Financial Times that European markets can't afford to operate with the assumptions of past affordability.
This shift in tone represents a significant departure from 2025, when European and Asian markets led the charge in price increases, notably the Spanish stock exchange. The fundamental dynamic has shifted dramatically. Blackrock’s operations reveal a clear reassessment: despite Donald Trump’s actions, the US presents a lower risk profile than Europe, demanding more selective investment strategies – particularly within the energy sector. The gap between markets is widening, with Brent crude significantly more expensive outside of the US.
Price predictions and strategic shifts
Mirova, part of Natixis IM, is forecasting a ‘non-linear’ crisis in the Gulf, predicting energy prices will remain structurally higher than pre-crisis levels. They warn of an underestimated scarcity risk, potentially pushing the Brent crude benchmark to $150-200 and natural gas to around $100-150 per MWh. The destruction of vital oil and gas infrastructure in the region – a process that will take considerable time – coupled with the urgent need to rebuild strategic reserves, is creating sustained upward pressure.
However, Federated Hermes’ Stephen Auth offers a counterpoint, employing the adage, “If it can’t be done, it won’t be.” He argues that unsustainable market trends eventually falter. Auth believes the conflict will resolve constructively, preventing a broader market downturn, and maintains a target of 7,500 points for the S&P 500 in 2026 and 8,200 by 2027. Yves Bonzon, from Julius Baer, highlights a crucial turning point in 2026, tied to issues like energy autonomy and technological independence – a factor now heavily influencing investor decisions.
Despite short-term market optimism fueled by ceasefires and peace talks, Bonzon stresses the persistent uncertainty and cautions against inflexible risk strategies. The conflict with Iran serves as a potent reminder that we’re entering a new world order, driven by strategic autonomy. The language of the market is shifting – acknowledging the realities of a militarized energy landscape, where control over critical resources like the Strait of Hormuz remains vulnerable.