The US decision to join Israel’s war on Iran has left investors and policymakers grappling with uncertain consequences. The situation remains fluid, but three broad paths forward can be identified.
Firstly, a rapid escalation of the conflict could lead to a significant disruption in global oil supplies. This would likely send shockwaves through financial markets, causing stock prices to plummet. As a major importer of oil, the US economy would be particularly vulnerable. A sharp increase in energy costs could exacerbate inflationary pressures and reduce consumer spending.
Secondly, a more measured approach from both sides might allow for a negotiated settlement that reduces tensions without sparking widespread conflict. In this scenario, oil prices could stabilize, and stock markets might experience a moderate correction. However, the longer-term implications of such a deal would remain uncertain.
Lastly, a prolonged stalemate or proxy war between Israel and Iran could result in a prolonged energy crisis, leading to a sharp increase in oil prices. This would have far-reaching consequences for global economies, including the US. Stock markets might enter a period of volatility, with investors seeking safe-haven assets like gold and bonds.
As the situation continues to unfold, investors and policymakers must carefully consider these three possible outcomes and their potential impact on oil prices and stock markets.
Source: https://www.barrons.com/articles/iran-war-3-scenarios-oil-stocks-3eaf40ee