Please see the below article from WH Ireland detailing their discussions on ongoing predominant geopolitical factors that are continually shaping markets. Received yesterday 28/09/2026.
World equity and bond markets have been very volatile this year based on changing perceptions of the war in the Middle East. The US intervention against Iran was meant to be a short sharp bombing campaign to change the government. The aims were to stop Iran backing the Houthi, Hamas and Hezbollah terrorist groups in Yemen, Gaza and Lebanon and to end the Iran nuclear programme. Whilst US bombing technology was good enough to remove many of the government including the Supreme leader, Iran replaced them with even more determined anti US representatives with a new motive for revenge.
President Trump expected an outcome similar to Venezuela, where he removed the President with no loss of life, and was able to coerce the remaining government to move Venezuelan oil under US influence. He now wants to find a way out of the war which has become entrenched and is a significant problem, not a triumph, for him politically. Higher gas (petrol) prices, annoyance amongst supporters that he has gone back on his promise to avoid foreign wars, and the threat of higher interest rates holding back the economy means he faces a stiff test in the mid-term elections. Republicans are likely to lose the House of Representatives, with the Senate also at risk.
The US claim they did great damage to Iran’s nuclear installations, but there are differing views about how much enriched uranium Iran still has and how long it might take to develop a full nuclear bomb capability from here. Meanwhile Iran retaliated by seeking control over shipping using the Straits of Hormuz as an effective strangle hold. The US countered with a naval blockade of Iranian trading vessels. This has created a standoff between the US and Iran over control of the passage of ships in this important waterway.
Iran, through her three proxies, can also prosecute war against the US and her ally Israel in Gaza, Lebanon and Yemen. In the last few weeks, the Houthis have taken more of the coastal lands next to the Red Sea, and strategic islands offshore. This increases their ability to disrupt shipping going into and out of the Red Sea en route to the Suez Canal. It means both main routes for Saudi to export her crude oil by the Straits of Hormuz to the east and the Red Sea to the West are now vulnerable to attacks on her shipping. Iran has also succeeded in damaging the crucial oil pipeline Saudi has been using to carry oil from the blocked Straits of Hormuz area across to the Red Sea coast. As a result, Saudi oil output is said to be down by as much as 4 m barrels a day, driving up the price of crude oil.
Global bonds sell off when news of the war intensifying becomes widespread. Any general view that the war will drag on forces up oil prices and puts pressure on growth forecasts. This in turn depresses bond prices as investors fear the rise in inflation from dearer energy and petrochemicals, like fertiliser. There is an assumption that higher interest rates will be needed to control prices. Equities can also sell off on stories of a longer and more damaging war as higher interest rates, blocked trade routes, dearer shipping, and more inflation are detrimental to business in general.
In contrast, when it appears diplomacy may bring a truce or broader peace, bonds and equities are likely to rally. The oil price can drop away quickly. The current ‘war time’ range for oil has been between $70 and $120 a barrel based on rumours and forecasts of how much oil will be taken out of circulation by blockades of crucial sea lanes and by direct attacks on tankers, and on varying timetables for the end of the conflict.
There are crucial shipping routes that are restricted and subject to the vagaries of war and politics. The Suez Canal is seeing reduced passage. Iran claims the Straits of Hormuz are shut to tankers not approved by themselves, whilst the Bab al Mendeb narrow entrance to the Red Sea and Suez corridor is subject to Yemeni threats and has reduced flows. The recent break through by the Houthis in Yemen offers a greater threat to Bab al Mendep and shipping entering the Red Sea. Their immediate target is Saudi shipping, as Saudi seeks to send its oil out by this route to replace the dangerous Straits of Hormuz exit. The US keeps out of the fighting in the hope its ships will not be damaged.
The US/Iran war is now mainly a war for control of the Straits of Hormuz. This was always an international waterway allowing passage of 20 m barrels of oil a day by tankers representing one fifth of world traded oil supplies. The US claims they have removed the mines from a specific route and accompany ships at night, sometimes with their responders turned off. The Treasury Secretary has said they can get half the usual amount through the Straits. President Trump has been more optimistic. Recorded vessel numbers are much down implying only a handful of ships a day have been making it, compared with around 100 when the Straits did accommodate 20 m barrels of oil in transit. Iran claims only oil shipping she approves has made the passage. The US claims they have impeded most of the Iranian oil exports. Attempts at independent counting of ships may be affected by vessels travelling to avoid detection.
It is difficult to see how either side can deliver a knockout blow to the other to resolve this conflict any time soon. Whilst the US is optimistic in its published statements, in practice it is relying on attrition as its blockade of Iranian shipping starves Iran of her usual oil revenues crucial to the economy and state budget. So far Iran has managed to export enough oil to her counter parties despite the blockade and has an ability to get her citizens to accept hardship and sacrifice by running a state under strict military discipline from the Revolutionary Guards.
Iran was hoping President Trump would accept a poor settlement to get the war over in good time before the mid-term elections. Instead, he seems to have accepted that the war is not about to be resolved: hence the offer of $5000 a person by way of bonus or dividend if they return a Republican Congress.
Trump’s allies in the Gulf are doing their best to see if a diplomatic compromise can be achieved. The most likely outcome is continuing flare ups without either side doing bigger scale damage to each other, with the war dragging on. Both sides will get some oil out, but oil prices will remain higher for longer given the overall reductions in supply. Saudi’s recent losses against the Houthi in Yemen are another reversal for the US as well, but the US will be reluctant to put its own forces into that additional conflict.
In the longer term the Gulf states will complete the construction of pipelines and new transit routes to avoid Hormuz altogether for many cargoes, and to give themselves more flexibility over which of several routes they can use to sell their own oil and gas. These are wealthy states, able to spend what it takes to create routes for oil export. They still need to make sure that at least one is without mines and missiles attacking commercial shipping.
Today markets are on a sceptical tack; the Saudi’s have not come back with a solution to the attacks from Yemen, and the US has so far decided to stay out of this additional conflict. While it is clearly in both the US and Iran’s interests to cease attacks on each other’s oil trade, neither wish to compromise to provide an early and lasting truce. President Trump is reluctant to escalate the war, but it is difficult to see a catalyst for weaker oil prices in the short term. The ongoing tussle between high inflation fears, and higher borrowing costs is setting the tone for both equities and bonds, and likely to do so for some time.
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Alex Clare
29/09/2026