Disrupting

US strikes on Iran escalate Strait of Hormuz tensions, spiking energy prices, disrupting trade and heightening global geopolitical risk.

Trade traffic within the Strait of Hormuz has nearly halted as fuel tankers and other shipping remain vulnerable to attacks and are virtually uninsurable, amplifying fears that the US-Israeli war on Iran is turning into a broader global conflict with major economic consequences.

Global energy prices, especially, are a key focus point since the Strait serves as a critical maritime artery for roughly 20% of the world’s oil flows — 70% of that oil goes to China, South Korea, India, and Japan.

Meanwhile, President Donald Trump’s standoff with EU leaders over the use of certain military bases is making an already contentious situation worse.

Chokepoint Under Fire

Iran’s Revolutionary Guards claim total control of the passage just days after US-led airstrikes killed Iran’s Supreme Leader, Ayatollah Ali Khamenei. The UK Maritime Trade Operations Center is actively documenting multiple vessel attacks and electronic interference affecting navigation in and around the Gulf.

A bomb-carrying drone boat struck a Marshall Islands-flagged tanker in the Gulf of Oman, killing at least one mariner, according to the Wall Street Journal, citing Omani authorities.

The economic shock was swift. West Texas Intermediate crude notched its biggest two-day rally since March 2022. European natural gas prices nearly doubled in 48 hours. The biggest jolt came after QatarEnergy halted liquefied natural gas production following attacks on its facilities, sending European gas prices soaring more than 40%. The United States Oil Fund LP rallied over 15% over the past five days.

Analysts are also at odds over whether a total Iranian blockade will occur.

Insurance Vanishes, Ships Stall

“A sustained, structural military blockade by Iran that totally stops ships from passing through is unlikely,” Morningstar Equity Director Joshua Aguilar said. Still, the commercial reality may produce the same effect.

“Ships may not pass through because no insurance is willing to cover them,” Aguilar added

Mutual insurers such as the London P&I Club, NorthStandard, UK P&I Club and Noord Nederlandsche P&I Club provide coverage for vessels navigating volatile regions. If that coverage drops, shipping companies face untenable exposure — effectively freezing commerce even absent a formal blockade.

In response, Trump said on his Truth Social platform that he had ordered the US International Development Finance Corporation to offer political risk insurance and guarantees “for the financial security of all maritime trade, especially energy, traveling through the Gulf.” He also said the US Navy would escort tankers through the Strait.

BIMCO’s Chief Safety & Security Officer, Jakob Larsen, scrutinized the logic of Trump’s plan. Indeed, naval escorts would reduce the threat ships currently face.

“That said, providing protection for all tankers operating in areas currently threatened by Iran is unrealistic,” he says. “This would require a very high number of warships and other military assets.”

CaixaBank, in a research note on Wednesday, issued its own warnings about Iran’s attacks and Strait of Hormuz closures. Energy prices will spike as long as the disruption continues, the firm predicts.

“Iran’s response — expanding the radius of the conflict, effectively closing maritime traffic through Hormuz, and threatening critical infrastructure — is causing a short-term escalation of tensions,” the firm stated. “It remains to be seen for how many days this response can be sustained and what approach will be taken by the new leadership core (and, in particular, by Khamenei’s successor).”

Persistent high prices could prompt hawkish European Central Bank and Federal Reserve moves, increasing economic drag, the firm continued.

Transatlantic Talks Turn Tense

The maritime chaos is unfolding alongside a sharp diplomatic rupture with Europe. Trump on Tuesday threatened to “cut off all trade with Spain” after Madrid refused US access to its military bases. He also criticized the UK’s decision to block the use of Diego Garcia in the Indian Ocean.

“This is not the age of Churchill,” Trump said during a White House meeting with European counterparts. “The UK has been very, very uncooperative with that stupid island that they have.”

The remarks underscore mounting friction within NATO and the broader Western alliance at a moment when coordinated action would be critical to stabilizing markets. Instead, the spat adds another layer of uncertainty to global trade flows already strained by inflation and tariff confusion on the heels of the US Supreme Court ruling against Trump.

Many dealmaking plans are also likely on hold, marking a stark contrast to 2025, the second-highest year on record for transaction value.

“The sentiment was that the stars were aligned” for a similar trajectory in 2026, said Kyle Walters, an analyst at PitchBook.

M&A consultancies such as McKinsey & Company and Bain & Co. had projected sustained M&A growth in 2026 due to energy security priorities, sovereign wealth fund firepower, and supportive fiscal reforms.

Then one weekend changed the narrative. As Walters puts it: “Uncertainty is bad for M&A appetite.”

Tariff ambiguity can slow deals. Inflation complicates financing. Armed conflict in a region central to global energy flows is far more destabilizing.

“In periods of uncertainty, buyers take a step back. They’re in wait-and-see mode,” Walters said, adding that domestic M&A has been “flipped on its head.” Cross-border activity is particularly exposed, with capital flight, currency volatility, and political risk creating an “unopportunistic M&A environment.” European firms considering expansion into the Middle East now face heightened scrutiny; “It has to be an A+ transaction to proceed,” Walters said.

Markets Brace For Escalation

What began the year as a story of alignment and acceleration has become one of recalibration — with capital pausing just as geopolitical risk surges.

BMI, a unit of Fitch Solutions, outlined a short-term scenario in which the US coordinates with Israel to overwhelm Iran and minimize retaliation against US assets and the Strait itself.

But even a limited campaign carries economic consequences.

Abigail Hall, a senior fellow at the Independent Institute, warned that energy markets are likely to bear the brunt. “There are already concerns about shipping and other disruptions — particularly around the Strait of Hormuz,” she said, pointing to “knowledge constraints on the part of policymakers and the presence of misaligned incentives.”

Hall also expressed skepticism that the US-led strikes would produce long-term political transformation inside Iran. “You may have ‘cut the head off the snake,’ but neglected the fact that there were many other vipers in the room,” she said.

Military strikes, she explained, often empower the most extreme factions of a country and produce a “rally-around-the-flag” effects whereby an external attack draws the civilian population toward the existing regime.

“In Iran we’ve seen that military escalation, and the domestic dissent it inspires,” she adds. “It often leads to harsher repression and increased regime control.”