Geopolitics Incorporated x Permutable AI – Risk Pulse Report
Iran and the Middle East: How energy systems are being leveraged as strategic tools in the current geopolitical crisis
Energy flows are no longer simply shaped by geopolitics. They are increasingly being used within it – creating a new era of instability in global commodity markets.
2026
Geopolitics Incorporated
Permutable AI
Introduction
This report, produced by Geopolitics Incorporated in collaboration with Permutable AI and our asset-level and geopolitical intelligence, combines expert-level geopolitical analysis with real-time narrative and sentiment intelligence to assess how energy is being weaponised in the current crisis environment.
The international system is once again being reshaped by a major geopolitical shock, with wide-reaching implications for global energy, commodities markets, and geopolitical alignment. While the current escalation centred on Iran, Israel, and critical Middle Eastern chokepoints differs from Russia’s invasion of Ukraine, both crises reflect the same underlying shift: the post-Cold War era of relatively stable, “business as usual” energy and commodities markets has given way to a more volatile and contested landscape.
What distinguishes this phase of the Middle East crisis is not simply the risk of direct confrontation between states, but the widening of the conflict across multiple fronts – including maritime chokepoints, Gulf infrastructure, Lebanon, and critical civilian and energy-linked assets. Energy flows are no longer simply shaped by geopolitics; they are increasingly being used within it.
Taken together, the conflicts in Ukraine and the Middle East point to a new “energy instability nexus”, defined by strategic behaviour from resource-rich states, continued dependence on fossil fuels, and the rising ability to weaponise energy flows to expose economic vulnerabilities across the US, Europe, and key import-dependent economies in Asia.
Source: Permutable AI – Geospatial intelligence showing Brent crude-related events filtered by “attack” across the Middle East, highlighting concentrated clusters of escalation around key energy nodes and transit routes.
Source: Permutable AI – Middle East intelligence showing concentrated, high-impact geopolitical signals around Iran and the Strait of Hormuz, with predominantly bullish sentiment indicating markets pricing escalating disruption risk ahead of realised supply impacts.
Executive Summary
Energy weaponisation has entered a new phase, extending beyond supply to chokepoints, shipping routes, civilian infrastructure, and narrative signalling
Energy markets are increasingly driven by perceived disruption risk, with prices reacting in real time to escalation signals rather than waiting for confirmed supply loss
Chokepoints such as the Strait of Hormuz remain central strategic assets, but the conflict is no longer confined to Hormuz alone – it is expanding across Lebanon, Gulf infrastructure, and regional logistics systems
A “mobility premium” is emerging, with transport, routing, and insurance shaping prices as much as production volumes
Shipping risk has become a key transmission mechanism, directly influencing oil and LNG pricing through tanker disruption, insurance withdrawal, and route viability
Markets are pricing escalation before it materialises – sentiment and news flow act as leading indicators of price movements across energy commodities
Despite reports of indirect messages through intermediaries, there is currently no clear evidence of formal US-Iran negotiations, underscoring continued strategic deadlock
The macroeconomic effects are global and increasingly visible, feeding into inflation, transport disruption, logistics surcharges, and broader household cost pressures
Even in de-escalation, recovery will lag as elevated insurance costs, disrupted routes, and persistent risk premiums remain embedded in markets
Section 01
The current Middle East crisis illustrates a repeatable model of how energy is weaponised in modern geopolitical conflict.
Rather than being a byproduct of war, energy systems – from production and infrastructure to transit routes and pricing mechanisms – are actively targeted and leveraged to achieve strategic outcomes.
While the escalation may have surprised some, the trajectory towards confrontation between Iran, the US, Israel, and regional actors had been building, particularly following the Hamas attacks in October 2023. That event triggered a chain reaction that has reshaped regional power dynamics and accelerated a global energy shock.
What has emerged is a clear expression of Iran’s preferred way of war: offsetting conventional military limitations through asymmetric tools designed to generate instability and exploit vulnerabilities in global energy markets.
Rather than pursuing territorial expansion, Iran’s approach is centred on cost-imposition – using ballistic missiles, maritime disruption, pressure on regional infrastructure, and proxy networks such as Hezbollah to distribute the economic burden of conflict across regional and global actors.
The underlying logic is one of “deterrence by punishment”: extend the conflict, elevate energy insecurity, and increase global economic pressure to the point where external actors, particularly the US, are incentivised to seek an off-ramp that preserves regime survival.
In contrast, US objectives remain less clearly defined, ranging from deterrence and containment to more expansive outcomes.
Washington has signalled that its objectives are close to being met, while at the same time suggesting that diplomatic channels may be active through intermediaries. Tehran, however, continues to insist that it has no intention of negotiating for now, making clear that indirect message-passing should not be mistaken for formal diplomacy.
This contradiction reflects a deeper strategic uncertainty: while earlier assumptions in Washington and Jerusalem appeared to lean toward regime change or systemic collapse, the conflict has instead exposed the limits of military pressure alone and left end-state objectives more ambiguous.
There are also emerging signs of divergence between Washington and Jerusalem. Israel appears to favour a harder end state and broader coercive pressure, while the US may be more inclined toward stabilisation, potentially accepting regime continuity in exchange for restored energy flows and an end to wider regional disruption.
What is clear is that the operational focus is shifting. After an initial phase centred on degrading Iran’s strike capabilities, the conflict is becoming increasingly maritime, with efforts turning toward securing critical energy transit routes.
This introduces a complex and costly challenge: ensuring freedom of navigation through chokepoints such as the Strait of Hormuz. Reopening and securing these routes may require sustained naval presence, escort operations, and mine-countermeasure activity.
At the same time, the risk environment is no longer limited to maritime transit alone. Attacks and threats involving power infrastructure, airports, fuel depots, and neighbouring states indicate that the conflict is evolving into a broader campaign against the systems that sustain regional energy, trade, and civilian stability.
This maritime phase is therefore likely to be both operationally demanding and economically significant, with direct consequences for global energy markets, shipping systems, and broader economic stability.
Price movements are not driven by a single factor, but by the interaction of competing narratives – with dominance shifting over time as geopolitical and disruption sentiment intensify.
As the conflict transitions into this phase, its impact is increasingly reflected not just in physical disruption, but in how markets reprice risk in real time. Permutable’s asset-level sentiment indices provide a real-time view of the underlying drivers shaping energy markets. By decomposing sentiment across geopolitics, physical supply, and disruption signals, the data reveals clear inflection points where narrative shifts precede market repricing in both Brent crude and LNG.
Periods where geopolitical and disruption sentiment intensify consistently lead price acceleration, while weakening signals often precede stabilisation or reversal. In this context, narrative intelligence provides a forward-looking view of market structure – identifying not only that prices are moving, but why, and which drivers are most influential at any given moment.
Source: Permutable AI – Asset-level sentiment indices showing how shifts in geopolitical, supply, and disruption narratives precede key inflection points in Brent Crude, WTI, Natural Gas and Gasoline pricing, providing a real-time view of the drivers behind market repricing during geopolitical tension.
Section 02
A defining feature of the current crisis is the extent to which energy markets are responding not only to physical disruption, but to the narrative intensity surrounding critical chokepoints – particularly the Strait of Hormuz. Recent sentiment data shows a sharp and sustained increase in Hormuz-related coverage, with predominantly escalation-driven signals aligning closely with the rise in Brent crude prices.
Source: Permutable AI – Sentiment intelligence showing sustained increases in narrative intensity around the Strait of Hormuz, closely tracking Brent crude prices. Markets price the probability of disruption rather than confirmed supply loss.
This highlights a key shift: energy weaponisation is no longer limited to physical actions such as infrastructure strikes or maritime disruption – it also operates through the amplification of perceived risk. As narratives around chokepoint instability intensify and persist, markets begin pricing in disruption well before any material supply loss occurs.
It is the density and persistence of escalation signals – not isolated events – that drive sustained market impact and upward price momentum.
More broadly, this reflects a structural change in how energy markets function under geopolitical stress. Price formation is increasingly shaped by the interaction between physical risk, market structure, and real-time information flows, with narrative acting as a transmission mechanism that converts geopolitical tension into economic impact at speed and scale.
Section 03
If globalised, interconnected markets define today’s economic system, then dependable, free-flowing energy remains its lifeblood. Despite advances in renewables, carbon-based fuels still dominate – and much of their movement depends on maritime transport. As a result, maritime security has re-emerged as a central concern, with concepts such as “sea denial” – now visible in the Persian Gulf – returning to prominence.
The structure of global trade routes is not random. Cost, distance, and insurance pressures funnel shipping through narrow, highly concentrated corridors, turning chokepoints such as the Strait of Hormuz, Suez Canal, and Strait of Malacca into critical strategic assets. Control – or credible threat – over these routes creates outsized geopolitical and economic effects, allowing states to impose costs, disrupt flows, and generate leverage. This is why the threat to close the Strait of Hormuz has long been embedded in Iran’s strategic playbook, and why securing it remains a recurring priority for the US and its allies.
Global Oil Chokepoints Map – The Strait of Hormuz sits at the convergence of the world’s most critical energy transit corridors, making it the single most strategically significant chokepoint in the global oil supply chain.
What is increasingly evident is that vulnerability is no longer defined solely by physical disruption, but by “mobility risk” – the ability to move energy, not just produce it. Even limited threats, from sea mines and missile strikes to insurance withdrawal, can reduce tanker traffic and disrupt flows. More recent developments suggest this pressure campaign now extends beyond the shipping lanes themselves to adjacent infrastructure – including airports, fuel depots, and regional logistics hubs – widening the definition of energy and transport vulnerability.
In this environment, markets are pricing the probability that energy cannot reach end markets, reinforcing how shipping risk and narrative escalation translate directly into volatility and sustained geopolitical risk premiums.
Source: Permutable AI – Narrative intelligence showing that spikes in shipping risk sentiment precede and drive Brent crude price increases, as markets price mobility constraints rather than realised supply loss.
Despite the degradation of Iran’s conventional naval capabilities, it retains multiple asymmetric tools that sustain risk in the region. Coastal defence cruise missiles positioned along the Strait, fast-attack craft used to harass or seize vessels, and the potential deployment of sea mines all present ongoing challenges to commercial shipping. Clearing these threats – particularly mines – would be time-intensive and costly, prolonging disruption, elevating insurance premiums, and reinforcing the fragility of global energy transport systems.
Section 04
While disruption in the Strait of Hormuz has immediate military implications in the Persian Gulf, its macroeconomic impact extends far beyond the region. Iran’s strategic calculus rests on duration: the longer oil and LNG flows are constrained, the greater the pressure on the US and its allies from rising energy costs. These effects are already visible, with Europe facing renewed stress in gas markets – exposing ongoing vulnerabilities in its post-Russia energy transition.
As supply tightens, competition for alternative sources – particularly LNG – is intensifying between European and Asian importers, including Japan, South Korea, and Thailand. While major economies may turn to strategic reserves for short-term relief, these measures are temporary and cannot fully offset sustained disruption.
At the same time, LNG markets are being shaped not only by physical constraints, but by persistent geopolitical narratives. Escalation in coverage around Middle Eastern instability has aligned with rising prices, as markets increasingly price in disruption risk rather than realised shortages – embedding a durable geopolitical premium.
Permutable’s multi-theme sentiment intelligence provides a real-time view of how these pressures are forming across the system. Current signals show geopolitical tensions and infrastructure disruption overwhelmingly dominating market drivers, far outweighing traditional factors such as inventories or demand conditions.
This reinforces a critical macroeconomic shift: energy markets are no longer primarily responding to realised shortages, but to the probability of disruption – particularly to transport, routing, and infrastructure. In effect, pricing is being driven upstream by risk accumulation, which then transmits downstream into inflation, trade flows, and broader economic conditions.
Source: Permutable AI – Multi-theme sentiment intelligence showing geopolitical tensions and infrastructure disruption dominating energy market drivers.
Source: Permutable AI – Risk accumulation rather than realised supply loss is driving macroeconomic transmission across inflation, trade flows, and broader economic conditions.
The macroeconomic effects are no longer abstract. Rising fuel costs are already feeding into transport protests, logistics surcharges, and broader household cost pressures, showing how energy weaponisation transmits quickly from strategic conflict to everyday economic stress. In this sense, the real economy is increasingly functioning as the downstream shock absorber of geopolitical disruption.
Efforts to stabilise markets through measures such as easing restrictions on Russian energy may provide limited relief, but introduce broader strategic trade-offs – including strengthening Russia’s capacity to sustain its war in Ukraine. This highlights the interconnected nature of today’s energy system, where attempts to resolve one disruption can amplify risks elsewhere.
Iran’s strategy accounts for domestic political pressures globally: by sustaining disruption, it increases the likelihood that external actors seek a negotiated off-ramp under mounting economic and political strain.
For governments more broadly, external energy disruption is increasingly translating into domestic political pressure through higher fuel bills, transport disruption, and inflation-sensitive supply chains. Iran’s strategy appears to account for this dynamic: by sustaining disruption and amplifying global economic stress, it increases the likelihood that external actors seek a negotiated off-ramp under mounting domestic and international pressure.
Section 05
The conflict is approaching a series of decision points, with each side seeking to force a shift in trajectory. For the US and its partners, the focus remains on degrading Iran’s core tools of power projection – from missiles and drones to naval assets and military infrastructure. At the same time, Iran’s continued ability to retaliate, survive, and widen the theatre of disruption has weakened earlier assumptions that overwhelming military superiority alone would produce a rapid political end state.
For Iran, the increasing reliance on maritime disruption signals a higher tolerance for risk. While closing the Strait of Hormuz has historically been viewed as a last resort, current actions suggest a willingness to test that boundary. If existing measures fall short, Iran could expand targeting to critical Gulf infrastructure – particularly desalination, fuel storage, airport, and power systems – with cascading economic and humanitarian consequences. There is also scope to extend disruption beyond the Gulf by targeting alternative export routes.
For the US and Israel, military pressure has not yet produced a clear political end state. Iran remains defiant, indirect message-passing has not translated into formal negotiation, and Gulf states are increasingly exposed to retaliatory spillover. This raises the likelihood of a prolonged conflict in which operational success does not necessarily produce strategic closure.
Strategic divergence may also become more pronounced. While Israel may favour harder coercive measures, including broader targeting of strategic infrastructure, the US appears more inclined to balance military pressure with eventual stabilisation. That divergence is likely to shape the next phase of the conflict and complicate alignment on end-state objectives.
The impact extends well beyond oil and gas. Disruption across Gulf energy routes is already feeding into a wide range of sectors, including fertiliser, aviation, pharmaceuticals, aluminium, semiconductors, and petrochemical-dependent manufacturing. Even in a rapid de-escalation scenario, recovery will lag, with elevated insurance costs, rerouted shipping, and constrained supply continuing to shape markets.
| Timeframe | Key Market Impacts |
|---|---|
| Short term (30-60 days) | Shipping disruption, insurance spikes, price volatility, tanker rerouting, inventory drawdowns |
| Medium term (90-180 days) | Supply chain rerouting, freight repricing, LNG competition, strategic reserve use, industrial demand impacts |
The trajectory of the conflict remains highly uncertain. Wars are inherently non-linear, shaped as much by political will as by military capability, and early assumptions of a short conflict have already been challenged. One of the clearest lessons of the current phase is that early assumptions of rapid regime destabilisation have not been borne out. Iran remains capable of imposing regional costs, external actors remain divided on end states, and the conflict is increasingly defined by endurance, spillover, and economic pressure rather than decisive resolution.
Several geopolitical wild cards could materially alter the path of the conflict. GCC states have so far avoided direct offensive action, but their exposure is increasing. Joint public condemnation of Iranian attacks, infrastructure strikes in the Gulf, and growing doubts over the credibility of external protection all raise the risk of a harder regional response over time.
While Houthi activity has been less central to the current phase of escalation than in earlier Red Sea disruption, the movement remains a latent escalation risk – particularly if pressure expands toward alternative export corridors or Red Sea-linked infrastructure.
At the same time, growing international naval deployments could evolve into a coordinated maritime coalition – particularly if reopening the Strait of Hormuz requires sustained multinational security operations or direct action against Iranian capabilities.
The conflict is also reshaping the position of major powers. China faces rising energy costs and increased risk to its extensive investments across the Middle East, even as it remains heavily reliant on regional oil flows. For Russia, however, disruption presents both economic and geopolitical upside – from higher oil prices to deeper strategic alignment with Iran. Together, these dynamics reinforce the global nature of the crisis, where regional conflict is rapidly translating into systemic economic and geopolitical consequences.
Section 06
Tracking energy weaponisation requires moving beyond traditional supply-demand indicators to capture how risk is forming in real time. At Permutable, our approach combines event-level news ingestion with entity and theme classification, allowing geopolitical developments, chokepoint risks, and energy-related disruptions to be quantified as structured signals. These signals are then weighted by relevance, intensity, and persistence, producing a dynamic view of how narratives evolve across markets.
Crucially, the methodology focuses not just on isolated events, but on the density and continuity of coverage – enabling early identification of escalation patterns. By mapping sentiment and narrative shifts against assets such as crude oil, LNG, and shipping indices, it becomes possible to observe how markets begin pricing risk before physical disruption materialises.
Source: Permutable AI – Multi-theme sentiment dashboards track geopolitical tensions, trade restrictions, production risks, and policy signals in real time. Spikes in narrative intensity align with escalation events and market-moving developments.
In practice, this creates a repeatable workflow for tracking energy weaponisation through key themes and keywords:
This multi-dimensional view is critical. Rather than analysing risk in isolation, it allows users to see how different layers – from geopolitical escalation to trade restrictions and production signals – interact and reinforce one another in real time.
The result is a set of practical applications: early warning of disruption risk, identification of emerging pressure points across energy systems, and improved scenario analysis for traders, analysts, and policymakers. More broadly, it provides a framework for understanding how narrative itself has become a transmission mechanism – translating geopolitical tension into market impact with increasing speed and precision.
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