The Israel - Iran conflict escalation increased since 2019, progressing from covert attacks on Iranian proxies in Syria and Iraq to actual clashes. What began in 2019 as covert strikes against Iranian proxies in Syria and Iraq erupted into direct military confrontation, with global markets impacted. 

Key turning points:

Oil Shock 2025: How Middle East Tensions Are Fueling an Energy Crisis 

One of the most immediate effects of the Israel-Iran war, which escalated on June 13, 2025, was a sharp increase in oil prices. Iran, a major oil producer, plays a crucial role in global energy supply. The conflict disrupted oil exports, particularly from Kharg Island, which handles over 90% of Iran’s crude shipments. Following the initial Israeli strikes, Brent crude prices surged by approximately 7% on June 13, reaching $74.23 per barrel. 

Strait of Hormuz Crisis: The World’s Oil Lifeline Under Threat 

Analysts warned that further escalation, especially if Iran moved to block the Strait of Hormuz, through which about 20% of global oil passes could push prices beyond $100 per barrel. On June 22, Iran’s parliament voted to block the Strait, causing Brent crude to spike to $80.28, its highest since January. 

Higher oil prices have far-reaching consequences, increasing industry transportation and production costs. Countries reliant on oil imports, such as India, face inflationary pressures that could weaken their currencies and slow economic growth.

Gas Field Attacks: The Untold Risk to Global Energy Security 

Additionally, on June 14, an Israeli strike on Phase 14 of Iran’s South Pars gas field caused a fire and halted production of 12 million cubic meters of gas, raising further concerns about global energy security. 

Middle East Power Play: U.S. vs. China in a Shifting Geopolitical Order 

The Israel-Iran war has upset the geopolitics of the Middle East, posing a threat to broader regional strife and upsetting international energy supplies. The United States supports Israel militarily and advises moderation, sending troops to prevent Iranian reprisals. Dependent on Gulf oil, China denounces Israel's strikes, demands a de-escalation, and offers to negotiate. Beijing prioritizes sovereignty and diplomacy, while Washington maintains deterrence, reflecting broader geopolitical competition in the region. Both nations seek stability, but their approaches differ.

Red Sea Chokepoint: How Houthi Attacks Are Disrupting Global Trade 

The Iraq–Israel conflict, though indirect, fuels broader Middle East instability, empowering Iran-backed Houthis to disrupt Red Sea shipping. Attacks near the Bab-el-Mandeb Strait have slashed container traffic by over 40%, forcing reroutes around Africa. This adds delays, spikes freight costs, and strains global supply chains, especially between Asia and Europe, highlighting the Red Sea’s critical role in maritime logistics. 

 Safe Haven Surge: Gold's Record Rally Amid Geopolitical Risks
 
As missiles flew, investors scrambled for protection:

📈 Gold hits $3,500/oz - up 30% since 2023
📈 Central banks buy 800+ tons annually
📈 Bitcoin jumps 18% as digital alternative

Historical Pattern: Gold typically gains 20-25% during major conflicts (see Gulf War, Ukraine invasion). 

Global Stocks in Turmoil: Winners, Losers, and What's Next 

However, some markets, such as India’s Nifty 50, demonstrated resilience. On June 18, the index rebounded by 0.32%, closing at 24,932, as investors shifted focus to domestic growth drivers and viewed the conflict as a short-term disruption. 

Meanwhile, defense and energy stocks rallied. On June 13, following Israel’s initial strikes, U.S. defense giants like Lockheed Martin and Northrop Grumman surged by over 4%, while Brent crude jumped 7.3% to $74.79 per barrel, boosting energy stocks like ExxonMobil. Indian defense stocks followed suit, with Mazagon Dock and Bharat Dynamics gaining up to 5% on June 17. 

In contrast, the airline and travel sectors suffered. On June 13, widespread airspace closures over Iran, Iraq, and Israel led to over 3,000 flight cancellations per day, affecting carriers like Emirates, Air India, and British Airways7. These disruptions continued through June 22, straining airline revenues and dampening investor sentiment in the sector.

Inflation on the Rise: How Commodity Spikes Are Hitting Consumers 

Rising commodity prices, particularly oil and gas, contribute to inflationary pressures worldwide. Higher energy costs increase production expenses for goods ranging from food to electronics, ultimately burdening consumers. Central banks may respond by adjusting interest rates to curb inflation, potentially slowing economic growth.

Global  Implications and Strategic Calculations

In addition to upsetting oil markets, raising inflation, and straining diplomatic ties, the Israel-Iran war has increased global instability. De-escalation via regional collaboration, economic sanctions, and international mediation is necessary for a path forward. Indeed, a protracted battle between Iraq and Israel is conceivable, particularly through militias supported by Iran.

Expanded sanctions on Iran that target its financial and military networks, diplomatic impasses at the UN over violations of its sovereignty, and regional mediation efforts by Gulf states to prevent escalation are all likely policy possibilities. Israel would advocate for international acknowledgment of preemptive defense powers, while the United States might increase its force presence in the region.

In geopolitical realignment,  Iran’s exit from the UN atomic agency and its growing isolation from the West are pushing it into China’s orbit, not just as a trade partner but as a strategic ally. Restoring geopolitical equilibrium and preventing further escalation could be achieved by fortifying diplomatic ties and nuclear agreements.

Key Takeaways for 2025

✔ Energy prices will remain volatile - hedge your portfolio
✔ Defense and renewables sectors are long-term winners
✔ Diversify with 5-10% in gold
✔ Avoid airline and consumer discretionary stocks

"In geopolitics as in markets, it's not the event but the duration that matters most." - Former US Treasury Official