The Iran War: Scenarios for Investors

by Arun Sai of Pictet Asset Management, 3/6/26

The war in Iran and the risk that it could lead to a wider regional conflict have roiled global financial markets. Oil and European gas prices have spiked while equity markets have seen sharp declines.

The prevailing fear is that the world might be about to experience an energy price shock as violent as the one seen in the aftermath of Russia’s invasion of Ukraine.

Although this can’t be completely ruled out, it is not our base case scenario. It is rare for geopolitical crises to inflict lasting damage on growth and financial markets; the only major exception was the oil crisis during the 1970s, and there is little to suggest a repeat of that.

The global economy is much less oil intensive than it was then; US is a net exporter of petroleum, while global supplies of crude are ample and reserve buffers remain reasonable.

So even if the price of crude rises 30%, it would shave only about 0.2 percentage points from global GDP growth and lift inflation by little more than one percentage point.

But oil is not the only factor at play. Investment sentiment is another important consideration, and here, markets look more vulnerable.

Equities and other riskier assets were in a fragile equilibrium in the weeks leading up to the US-Israeli military strike on Iran. Markets were caught between improving macroeconomic fundamentals on the one hand and a loss of confidence in the outlook for US technology stocks on the other. For this reason, stocks could prove more volatile than they otherwise would have been.

To better understand how events could unfold, we have conducted an analysis that explores various conflict scenarios.