This comprehensive analysis examines how the Iran-Israel conflict has impacted global financial markets, comparing its effects to the Russia-Ukraine war. Aimed at institutional investors, fund managers, and trading professionals, it offers critical insights for navigating geopolitical tension and understanding risk patterns and market opportunities during periods of heightened uncertainty.
As the storm brewed over global financial markets on 13th June with the Iran-Israel conflict, this unleashed a familiar risk-off posture amongst investors. Whilst the tremors might not match the seismic shock of the Russia-Ukraine war’s initial impact, the similarities in investor behaviour are unmistakable. As military strikes escalate, equities, after an initial shudder, have largely found their footing this week. It’s a precarious calm, as investors balance the perceived containment of the conflict with one eye on monetary policy and the other on potential global spillover should tensions fail to simmer.
The market’s pulse reflects this anxiety. The VIX, a barometer of volatility, surged above 20, mirroring heightened market uncertainty. Energy prices, predictably, have climbed. Initially, the stampede was towards traditional safe havens and the bedrock of defensive and energy sectors. Yet, beneath this broad movement, sectoral themes highlight persistent inflation risks and a hypersensitivity to every word from central banks.
Above: This chart shows that persistent geopolitical tensions pushed the VIX above 20 and drove energy prices higher; sharp drops in Brent Crude in April followed Trump’s tariff plans, while June’s VIX spike reflects Middle East conflict, prompting investors to seek safety in energy commodities.
The main concern for policymakers is the potential for regional escalation and its inflationary spillover. Sustained high oil prices could reignite inflation, threatening to douse the nascent monetary policy easing cycles across major central banks. This mirrors the commodity shock that followed the Russia-Ukraine war, where soaring prices exacerbated the global inflation trajectory.
This escalating conflict acts as a multiplier on an already fragile global economy, straining trade dynamics, slowing growth, fuelling inflation, and leaving central banks with less room to manoeuvre. Investors find themselves walking a tightrope, balancing geopolitical tremors against the subtle shifts in monetary policy.
It’s a feedback loop: instability constrains policy, which then impacts growth and market sentiment. In this storm of uncertainty, the ability to discern sectoral fragilities through real-time sentiment and price signals becomes not just valuable, but vital. Our Trading Co-Pilot analysis detected that geopolitical tension scores were registering uniformly high across the board in the energy sector (between 0.9-1.0), reflecting pervasive market apprehension. While the manifestation of this tension varies by sector, the underlying sentiment is undeniably shaped by the ongoing conflict which has dominated news coverage this last week. This is evident in the daily sentiment sum chart, where war-related topics spiked sharply on 13 June, underscoring the conflict’s outsized influence on market perceptions.
Above: This chart demonstrates that war related news is a persistent and often negative driver of market sentiment, with sharp declines such as the one on June 13, underscoring the powerful influence that geopolitical conflict exerts on market perceptions and behaviour.
Sectoral analysis via our Trading Co-Pilot heatmap
This is where a tool like our Trading Co-Pilot helps navigate a path, transforming raw market noise into actionable intelligence, guiding investors to identify opportunities and effectively weather the storm. Our Trading Co-Pilot decodes sectoral shocks with real-time sentiment signals. In periods of high uncertainty, disciplined analysis and selective positioning are key to staying ahead of market shifts using leading indicators. Our Trading Co-Pilot’s insights provide an unparalleled sectoral analysis, real-time insights, and historical context transforming raw market data into actionable intelligence, empowering investors to make disciplined, strategic decisions, identify opportunities, and mitigate risks during periods of high uncertainty.
Above: The energy sector sentiment heat map shows five key supply-side factors including, geopolitical tensions, inventory levels, infrastructure, production, and trade regulations. The heat map shows the impacted major energy commodity prices during the week of June 10–16, highlighting which drivers influenced price movements across the sector.
Energy: A tale of two spikes
Both the tensions in the Russia-Ukraine war and the Iran-Israel conflict have shaped the story of energy prices in recent years, fuelled by fears of supply disruption.
Russia-Ukraine war (February 2022)
The invasion unleashed an immediate torrent. Brent crude leapt 15.7% (from $92/bbl to $106/bbl), WTI oil ascended 7.3% (from $92.10/bbl to $98.80/bbl), and European natural gas (TTF) experienced a monumental, sustained surge, fundamentally redrawing the global energy map by August 2022.
Iran-Israel (current tensions)
The recent Middle East escalation, whilst initially less explosive, is a simmering cauldron. Brent crude gained 9% (from $68/bbl to $75/bbl), WTI oil climbed 10% (from $67/bbl to $74/bbl), and LNG saw a modest but notable 5% bump (from $36/MMBtu to $38/MMBtu). As of 17th June 2025, Brent has eased to around $74/bbl, WTI to $72/bbl, whilst LNG continues its steady ascent to $39/MMBtu.
The lingering uncertainty surrounding the Strait of Hormuz, the narrow choke point through which a quarter of the world’s seaborne oil and LNG flows, casts a worrying shadow if tensions mount. Any closure here would unleash a price surge mirroring the Russia-Ukraine war’s extreme peaks of $115/bbl, with some analysts bracing for $100/bbl if regional tensions escalate. Whispers of targeting Iranian oil and gas infrastructure further amplify these supply fears.
Gold: The enduring anchor for investors
Across both geopolitical maelstroms, gold has unfailingly reaffirmed its status as the ultimate safe-haven asset.
Russia-Ukraine
Gold rallied significantly, climbing 3.8% from $1,907/ounce to nearly $1,980/ounce in early February 2022, an immediate and powerful embrace of its safe-haven status.
Iran-Israel
Gold again surged 1.8% (from $3,407/ounce to $3,467/ounce). However, recent profit-taking and the cautionary narrative of a bubble have led to a minor pullback. As of 17th June 2025, gold trades around $3,388/ounce, a -2% dip from its conflict high. Investor sentiment remains complex, weaving persistent anxiety with short-term market dynamics, all underpinned by the uncertain central bank narrative.
Above: This chart compares the performance of key commodities – Brent Crude, WTI Crude, TTF Gas, and Gold – following the outbreak of the Russia-Ukraine war in 2022 and the Iran-Israel conflict in 2025. The Russia-Ukraine war triggered sharper moves in Brent, TTF Gas, and Gold, driven by fears over European energy security and a surge in safe-haven demand. By contrast, WTI Crude saw a stronger reaction during the Iran-Israel conflict, reflecting heightened concerns over supply risks.
Commodities: Beyond the oil and gas fields
The ripples of geopolitical tension extend beyond energy, touching other commodity markets with varying degrees of influence.
Russia-Ukraine
This conflict directly impacted agricultural commodities, leveraging the region’s crucial role as a global grain basket. Industrial metals like palladium also experienced sharp surges, reflecting both supply anxieties and the heightened demand of a wartime economy.
Iran-Israel
Whilst its impact is less direct on the ground, the ongoing Middle East tensions contribute to broader supply chain disruptions and increased energy costs. Given the indispensable nature of Gulf shipping routes for global trade, these factors could indirectly inflate the prices of industrial metals and agricultural goods by lengthening transit times and spiking freight rates, echoing the broader economic pressures felt in 2022.
Equities & crypto: Markets weathering geopolitical headwinds
The Russia-Ukraine war initiated a sharp global equity sell-off, particularly impacting European markets tied to Russian energy. Similarly, the Iran-Israel escalation caused an initial market flinch. However, the current Middle East tensions, after an initial jolt, show a different narrative. Major stocks like the FTSE 100 and S&P 500 are demonstrating remarkable resilience. This strength is largely fuelled by robust energy and defence sectors, where investors gravitate during geopolitical turmoil. Broader equity markets also benefited from positive signals, such as recent Chinese retail data providing an unexpected boost to Asian markets.
In the crypto space, Bitcoin has seen mixed signals. It experienced a price surge followed by a technical pullback, declining from $107K to around $105.5K. This was primarily driven by geopolitical tensions, significant liquidations, and ongoing market volatility concerns. Despite this, bullish catalysts like MicroStrategy’s substantial Bitcoin purchase and positive news regarding Vietnam’s crypto legalisation provided some tailwind. Market sentiment remains cautious, as institutional interest has yet to translate into sustained upward momentum due to these external pressures.
Sectoral divergences: Unpacking the split market performance
The geopolitical landscape has painted a clear picture of market winners and losers.
Beneficiaries
Much like the Russia-Ukraine conflict, defence contractors and cybersecurity firms have emerged as unequivocal beneficiaries, their stock prices soaring on the anticipation of increased defence spending. Energy giants have also reaped significant gains, mirroring the commodity cycle witnessed in early 2022. And, of course, gold producers have seen their prices rise, cementing the metal’s safe-haven allure.
Impacted sectors
Conversely, sectors exquisitely sensitive to discretionary spending and soaring operational costs, such as airlines and travel stocks, have registered significant declines. This reflects a twin blow of flagging travel sentiment and surging fuel prices.
The Strait of Hormuz: A bottleneck of global trade
The shockwaves from Middle East tensions ripple throughout global markets. Escalating aggression directly impacts specific economic sectors through intricate supply chains, commodity prices, and the fragile threads of investor confidence. The shipping sector is navigating a treacherous path. Recent reports convey profound caution, with ship owners actively charting courses to avoid the Persian Gulf and the Strait of Aden. Oil shipping rates for Middle Eastern routes have spiked as some tanker owners and managers pause, assessing escalating risks and fuelling deep concerns over critical flows from the region.
Furthermore, electronic interference and GPS jamming in the Strait of Hormuz dangerously complicate navigation, prompting maritime authorities to urge caution and alternative communication. These disruptions inevitably lead to increased transit times, higher insurance premiums, and surging freight rates, further straining already fragile global supply chains.
Whilst the probability of significant supply disruptions might seem remote at this moment, the stability of shipping in and around the Middle East will be watched with caution. Iran’s ability to shut off the Strait of Hormuz is a stark reality. With the region responsible for about a third of the world’s oil production, major exporters like Saudi Arabia have limited scope to divert exports if needed. Whilst physical delivery of liquefied natural gas (LNG) doesn’t appear broadly affected yet, any interruption in these critical sea lanes would strain the market at a crucial juncture for Europe’s stockpiling season, stirring up reminders of the energy security woes that followed the Russia-Ukraine conflict.
Simultaneously, such disruptions weigh on operational output and outlays, leading to slower global growth and a higher inflationary burden as producers and consumers face elevated costs. This confluence of rising inflation and slowing growth is a key trait of emerging stagflationary pressures. It only complicates matters for central banks, as typical monetary policy tools, such as interest rate adjustments and quantitative easing, are less effective at addressing both growth and inflation simultaneously without exacerbating one over the other. Geopolitical risk, therefore, is a significant catalyst for this challenging and uncertain macroeconomic scenario, levying additional pressure on markets.
Trading Co-Pilot: A compass for uncertain times
The current geopolitical climate demands proactive, informed strategies to navigate the intricate interplay of global politics, economic fundamentals, and evolving market sentiment. In these periods of volatility, the ability to unpack sectoral themes using real-time sentiment and price signals becomes a competitive advantage that separates successful investors from those caught off-guard by rapid market shifts.
Our Trading Co-Pilot’s sentiment analysis offers a powerful lens, peering into financial news opinions and emotions surrounding market-moving events, topics, and companies and ultimately providing next gen intelligence for navigating future market activity and understanding how broader reactions in the news directly influence market performance. Through advanced techniques, including LLM models and AI machine learning, this analytical process seamlessly transforms vast amounts of unstructured data into actionable intelligence, helping you chart a clearer course.
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