The escalation of military conflict between the United States and Iran has driven global oil prices above $100 per barrel, sparking a significant surge in the U.S. dollar as investors pivot toward safe-haven assets.

This geopolitical instability has disrupted energy supplies in the Middle East and triggered a sell-off in global stock markets and major international currencies, leading to widespread concerns regarding prolonged inflation and a potential slowdown in global economic growth.

Key Points

• The U.S. dollar reached a three-month peak against the euro and saw sharp gains against the yen, sterling, and the Australian and New Zealand dollars.
• Safe‑haven shift: The dollar is outperforming gold as the preferred safe‑haven asset during this crisis.
• The surge in global oil prices has exerted significant downward pressure on the Thai baht, driven by Thailand’s status as a net oil importer.
• Brent and U.S. crude futures jumped to over $108 per barrel, with analysts warning that prices could reach $150 if Gulf energy producers are forced to shut down exports.
• Approximately one-fifth of the world’s crude and natural gas supply has been suspended due to Iranian attacks on energy infrastructure and shipping in the Strait of Hormuz.
• Iran has signaled a continued hardline stance by naming Mojtaba Khamenei as the successor to the Supreme Leader amidst the ongoing conflict with the U.S. and Israel.

The surge in global oil prices has exerted significant downward pressure on the Thai baht, driven by Thailand’s status as a net oil importer. High energy costs increase the country’s import bill, which threatens to flip its trade surplus into a deficit and encourages capital flight toward safe-haven assets like the U.S. dollar.

Currency impact

• The U.S. dollar surged to a three‑month high against major currencies (euro, yen, sterling, AUD, NZD).
• The Thai baht weakened sharply due to Thailand’s reliance on oil imports.

Financial markets are increasingly concerned that high energy prices will act as a “tax” on growth and stoke inflation, potentially preventing central banks from lowering interest rates. Economic repercussions are being felt globally, evidenced by a 1.6% drop in S&P 500 futures and a projected 40 billion baht revenue loss for the Thai tourism industry.

Thai economy effects

• Rising oil costs threaten to flip Thailand’s trade surplus into a deficit.
• Tourism revenue losses projected at 40 billion baht.
• Kasikorn Research warns the baht could slide to ~33 per USD if oil stays above $100.
• Bank of Thailand estimates each $10/barrel increase cuts GDP by 0.1–0.15 percentage points.

Kasikorn Research Center(K-Research) warns that if oil prices remain above $100 per barrel, the Thai bahtcould slide to nearly 33 to the dollar. This volatility is intensified because Thailand spends roughly 5% to 6% of its GDP on oil imports, a higher proportion than its Southeast Asian neighbors. Bank of Thailandgovernor Vitai Ratanakorn stated that these price hikes directly impact the economy, with every $10 increase per barrel potentially shaving 0.1 to 0.15 percentage points off the GDP.

Global repercussions

• Stock markets fell (S&P 500 futures down 1.6%).
• Economists warn of stagflation risks (high inflation + stagnant growth).
• Shipping costs and war‑risk premiums are rising.

The escalating Middle East conflict has triggered significant volatility in global energy markets, characterized by surging oil and gas prices and the effective closure of the vital Strait of Hormuz. Following U.S. and Israeli strikes on Iran, international benchmark oil prices like Brent crudehave jumped by nearly 30% in a week, surpassing $110 per barrel as traders fear a long-term disruption to the 20% of global seaborne oil that transits the region.

Energy market disruption

• Brent and U.S. crude futures jumped past $108 per barrel, with warnings prices could hit $150 if Gulf exports halt.
• About 20% of global crude and natural gas supply is suspended due to Iranian attacks in the Strait of Hormuz.

Economists warn that the current crisis could lead to global stagflation, a combination of high inflation and stagnant economic growth, particularly if energy infrastructure or shipping routes remain blocked for an extended period. While some analysts believe a global supply surplus may moderate long-term impacts, the immediate fallout includes skyrocketing maritime freight costs, increased war-risk premiumsfor shipping, and a shift in investor sentiment toward safe-haven assets like gold. National governments are responding by tapping strategic reserves and seeking alternative fuel sources from the U.S. and West Africa to mitigate the energy price shock.

Other People are Reading

Global equity markets have entered a phase of heightened volatility as escalating geopolitical tensions and rising crude oil prices triggered a sharp sell-off across major financial centres. From Asia to the United States, markets opened the week under pressure, reflecting growing investor anxiety over the economic fallout of a prolonged conflict and tighter energy supplies.

The risk-off mood has been visible across asset classes. Asian markets witnessed steep declines, with Japan’s benchmark plunging sharply while Hong Kong and mainland Chinese indices also slipped. Futures for Indian equities signalled a weak start as investors reacted to the negative global cues and uncertainty surrounding the trajectory of the conflict.

Market participants say the biggest concern now is that the conflict, which many initially believed would be short-lived, could drag on longer and create broader economic disruptions. According to Rajeev Agrawal from DoorDarshi India Fund, the consequences could be particularly severe if oil prices remain elevated for an extended period.

“This war was initially expected to be short, but things are becoming worse by the day,” Agrawal said, warning that tight oil markets could quickly create problems for many economies, including India.

The sharp fall in global equities has left investors grappling with a critical question: whether to protect capital by booking profits or to use the correction to deploy fresh money.

Rather than reacting impulsively to volatility, Agrawal emphasised the importance of portfolio rotation. “In such situations we rotate our capital,” he said, explaining that investors should gradually sell stocks that appear fully valued and redeploy the proceeds into companies that have become more attractive after the correction.
Periods of broad market stress, he noted, often push down prices across sectors, creating opportunities for long-term investors willing to look beyond near-term turbulence.Agrawal believes that certain sectors could prove relatively resilient despite the challenging macro environment. Financials, for instance, may not be as directly affected by rising oil prices compared to other parts of the economy.

“Financials will of course feel the impact if the economy slows, but the downside can sometimes be exaggerated in such market conditions,” he said, adding that this is where investors can selectively “cherry pick” opportunities.

Another theme he highlighted is renewable energy. With oil prices surging, the push for alternative energy sources could gain momentum, particularly in countries like India that are heavily dependent on energy imports. Investments in renewable energy, he said, could therefore benefit from the current global backdrop.

Even so, Agrawal cautioned against trying to perfectly time the market bottom. “It is very hard to know when the dust will settle,” he said, noting that unexpected developments can quickly change market direction.

Instead, he advocates a disciplined investment approach—maintaining some cash while gradually deploying capital during market declines. Investors should “start nibbling into positions” that have become compelling while also ensuring they retain enough liquidity to act on future opportunities.

In an environment where geopolitical shocks and energy markets are driving volatility, the strategy for investors may not lie in predicting the next market move, but in staying patient, disciplined and prepared to rotate capital as opportunities emerge.

Calamos Investments is a diversified global investment firm offering innovative investment strategies including U.S. growth equity, global equity, convertible, multi-asset and alternatives. The firm offers strategies through separately managed portfolios, mutual funds, closed-end funds, private funds, an exchange traded fund and UCITS funds. Clients include major corporations, pension funds, endowments, foundations and individuals, as well as the financial advisors and consultants who serve them. Headquartered in the Chicago metropolitan area, the firm also has offices in London, New York and San Francisco.  For more information, please visit www.calamos.com.

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