MARKET INSIGHTS · GEOPOLITICAL RISK · MARCH 2026
A factual briefing on the first ten days of market impact — and what it means for Australian wholesale investors.
Published: March 2026 · Read time: 6 min · Sources: Westpac Economics, AMP Capital, Oxford Economics, ICG, Bloomberg, SBS, RBA
What Happened
On 28 February 2026, the United States and Israel launched coordinated military strikes on Iran in an operation targeting military infrastructure and senior leadership. The strikes marked the beginning of an active armed conflict — one that markets had long priced as a remote tail risk.
Iran responded with missile and drone strikes on US military installations in Qatar, the UAE, and Bahrain, and issued formal threats to restrict access through the Strait of Hormuz — the narrow waterway through which approximately 20% of the world’s daily oil supply passes. By early March, tanker traffic through the Strait had effectively stalled.
By 4 March, US Secretary of State Marco Rubio had announced a second wave of intensified strikes. The conflict, ten days in, shows no sign of a near-term resolution.
Energy Markets
The oil market response was immediate and sharp. Brent crude rose approximately 10–13% in the opening days of the conflict, reaching ~$81.40 per barrel by market close on 4 March. Analysts at Goldman Sachs embedded an $18 per barrel geopolitical risk premium in their pricing model, corresponding to the scenario of a one-month Hormuz closure.
Natural gas prices were equally volatile. UK and European gas prices surged 35–60% as LNG flows through the region were disrupted. Germany recorded a 60% intraday spike on 1 March.
| Oil has risen approximately 36% year-to-date by early March, compounding existing inflation concerns from US tariff policy enacted earlier in the year. |
Source: Bloomberg Commodities, Westpac Economics, March 2026
Oxford Economics and Alpine Macro have modelled a range of scenarios. Their base case — a short-lived disruption with flows resuming within two to four weeks projects oil reverting toward pre-conflict levels with limited permanent economic damage. Their escalation scenario projects Brent reaching $113 per barrel on a one-month Hormuz closure. In a severe scenario, the sustained closure of three months or more could see oil approaching $130–$150 per barrel, a level not seen since the 2008 commodity shock.
Global Equity Markets
Equity markets absorbed the initial shock across all major indices. The Dow Jones Industrial Average fell more than 400 points on 2 March. The S&P 500 dropped 0.7% on the same day as European and Asian markets followed.
The most acute dislocations were in Asia-Pacific markets. South Korea’s KOSPI fell up to 12% in a single session on 4 March — its largest single-day decline since 2008, triggering an automatic circuit breaker halt. Thailand’s stock exchange imposed a trading curb after an 8% intraday fall. Japan’s Nikkei dropped over 2%.
Sector performance diverged sharply. Energy stocks and defence contractors gained. Airlines were among the hardest hit: United Airlines fell 6%, with regional Gulf carriers grounding flights as Middle Eastern airspace closed. Logistics and consumer discretionary stocks came under pressure from anticipated fuel cost increases.
| Historically, geopolitical shock events produce ASX initial declines of 2–5%, followed by recovery phases of 2–4 weeks when the conflict remains geographically contained. — AMP Capital |
Source: AMP Capital Markets Research, March 2026
Safe-Haven Assets and Currency Moves
Gold opened the week above $5,400 per ounce — a five-week high, reflecting the classic flight-to-safety rotation. The metal recorded $5,390 on Monday, before pulling back to $5,267 on Tuesday and $5,131 on Wednesday as renewed inflation concerns suppressed expectations for near-term US Federal Reserve rate cuts, reducing one of gold’s primary tailwinds.
The US dollar strengthened as investors reduced exposure to riskier currencies. This is a typical pattern in geopolitical risk events — capital moves into USD-denominated assets as a default store of value. The consequence for emerging market currencies, which are priced against a stronger dollar, is material.
US 10-year Treasury yields posted their largest single-day advance in several months as inflation expectations rose and bond prices fell. The market is now pricing a prolonged period of elevated energy costs into its inflation outlook, complicating the rate cut trajectory that many investors had anticipated for 2026.
What This Means for Australia
Australia’s economic exposure to the Iran conflict operates through several channels: energy pricing, inflation, interest rate policy, and equity market correlation.
On energy, Australia imports approximately 90% of its refined petroleum products. A sustained oil price shock feeds directly into domestic fuel costs. NRMA projects approximately 10% increases at Australian petrol pumps if disruption extends. Beyond petrol, higher energy costs flow through to transport, logistics, and manufacturing input costs.
On inflation, Westpac Economics’ modelling is specific. A one-month Strait of Hormuz disruption adds approximately one percentage point to Australia’s CPI. A three-month disruption could lift CPI by 1.5 percentage points at peak and reduce GDP growth by 0.5 percentage points. If Brent crude sustains $100 per barrel, Westpac projects Australian interest rates could settle 0.25 percentage points higher over the longer term.
| A three-month Hormuz disruption could spike Australia’s CPI by 1.5 percentage points and shave 0.5 percentage points from GDP growth. — Westpac Economics |
Source: Westpac Economics, March 2026
On the RBA, the implications are direct. The Reserve Bank had been navigating a careful path, managing residual inflation from the post-COVID period while monitoring global growth signals. The oil shock has effectively placed the RBA on hold. Former US Treasury Secretary Janet Yellen observed publicly that the situation makes the US Federal Reserve ‘more reluctant to cut rates’ — a statement with direct read-across to the RBA’s position. In a globally synchronised monetary environment, the Fed’s hesitation constrains the RBA’s room to move.
On the ASX, Bloomberg’s Australian market briefing identified the Iran conflict as a direct factor in equity market movements, alongside domestic petrol prices and currency response. Energy producers have attracted capital rotation as investors chase the oil price tailwind. Gold stocks have seen increased interest. The broader index faces headwinds from elevated input costs and uncertainty about the rate path.
Scenario Outlook — Three Paths
Three scenarios are currently in circulation among institutional analysts:
| Base Case | Escalation | Severe | |
| Hormuz | Short disruption, flows resume 2–4 weeks | 1-month closure, Brent to ~$113/bbl | 3+ month closure, Brent $130–$150+ |
| Oil Price | Reverts toward pre-conflict levels | +$25–$35 on current price | Near 2008 commodity shock levels |
| AU CPI | Limited lasting impact | +1 ppt at peak (Westpac) | +1.5 ppt peak; GDP –0.5 ppt (Westpac) |
| RBA | Rate cuts deferred; on hold | Rate cuts off the table | Rate hike scenario returns |
| Global recession risk | Low | Low but elevated | Mild global contraction possible |
Sources: Oxford Economics / Alpine Macro, Westpac Economics, AMP Capital, ICG Asset Management
The consensus base case remains that a full Strait of Hormuz closure is unlikely and that the most acute dislocations of the opening week will moderate as the situation stabilises. However, the range of outcomes on the table is wider than markets had priced before 28 February and the feedback loop between energy prices, inflation, and central bank policy represents a genuine constraint on the growth trajectory for 2026.
The Questions Wholesale Investors Are Asking
The events of the past ten days have prompted a consistent set of questions among institutional and wholesale investors reviewing their portfolio positioning. These are not new questions — but geopolitical shocks have a way of making them urgent.
- How does my portfolio behave when oil moves 10–15% in a week? Which allocations benefit, which are exposed, and which are structurally insulated?
- What is my real overnight exposure? Strategies that appeared liquid in calm conditions may carry material gap-open risk when markets are moving on breaking news at 2am.
- How is my alternative allocation correlated to energy prices? Private credit, infrastructure, and real assets all carry varying degrees of commodity sensitivity.
- Is my portfolio positioned for a delayed rate cut cycle? The RBA’s pause changes the calculus on rate-sensitive assets, fixed income duration, and leveraged strategies expecting relief from lower borrowing costs.
- What is the difference between volatility as a temporary condition and volatility as the new baseline? The geopolitical environment in 2026 — the US tariff policy, the Iran conflict, ongoing Ukraine settlement negotiations suggests investors should stress-test their portfolios against sustained uncertainty, not a single event.
Conclusion
The US–Israel–Iran conflict is, as of this writing, ten days old. Its ultimate economic trajectory depends on variables — military, diplomatic, and political — that no financial analyst can reliably forecast. What the first ten days have demonstrated is that the risk premium embedded in energy markets, the sensitivity of global equity indices to geopolitical shock, and the constraint on central bank flexibility in an inflationary environment are all real and measurable.
For Australian wholesale investors, the most actionable response is not a prediction about oil prices or RBA decisions. It is a structured review of portfolio exposure — to energy costs, overnight risk, leverage, and rate sensitivity — conducted with the same rigour that the current environment demands.
The base case remains that this resolves. But sophisticated investors do not build portfolios for the base case alone.
This article is for informational purposes only. It does not constitute financial advice and should not be relied upon as the basis for any investment decision. All data is sourced from publicly available third-party research as cited. Trivesta does not warrant the accuracy of third-party data. Past market events are not indicative of future outcomes. This content is intended for wholesale investors as defined under the Corporations Act 2001 (Cth).
Trivesta · Market Insights · March 2026
