A potential military conflict in the Middle East threatens to upend global energy markets as the US issues a renewed threat against Iran.
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US-Iran Tensions Flare With New Strike Threat in Past 24 Hours
A potential military conflict in the Middle East threatens to upend global energy markets as the US issues a renewed threat against Iran.
Geopolitical risk premium in oil markets is set to rise after US President Donald Trump threatened a “heavy blow” against Iran on May 19, revealing he was just one hour from ordering a strike the day prior.
"Wars, the threat of future conflicts and other political violence activities are likely to undermine geopolitical and economic stability in 2026 and for years to come," said Thomas Lillelund, CEO of Allianz Commercial, in a recent report on global risks.
The threat, which Trump said was delayed for 2-3 days at the request of Gulf allies to allow for negotiations, follows a period of heightened regional instability. The US / Iran conflict is already disrupting global trade flows and has contributed to political violence risk climbing to its highest-ever rank in the Allianz Risk Barometer.
A direct military confrontation could jeopardize the Strait of Hormuz, a critical chokepoint for about 21% of global oil consumption, potentially leading to a significant spike in crude prices and broader market turmoil as investors flee to safe-haven assets.
A Narrow Window for Diplomacy
President Trump stated he has given Iran a “limited time window” of two to three days to reach a diplomatic solution, emphasizing that Tehran must not be allowed to obtain nuclear weapons. The ultimatum came after he claimed to have called off a planned military strike on May 18 at the last minute, following calls from leaders in Qatar, Saudi Arabia, and the UAE who cited progress in peace talks. In response, Iran’s military has warned it would open “new front lines” and utilize new tools to retaliate against any aggression.
Global Risk Landscape Redefined
The standoff is intensifying concerns among businesses and insurers, with war now seen as the top political violence risk companies fear, according to research from Allianz Commercial. The conflict has the potential to generate larger insured losses than the war in Ukraine. This heightened risk environment is forcing companies to re-evaluate supply chain vulnerabilities, with nearly half of firms looking to renegotiate and diversify supply chains, a trend likely to be accelerated by the current crisis.
The situation is further complicated by a complex web of international interests. During his recent visit to Beijing, Trump reportedly sought China's cooperation in ensuring stability in the Strait of Hormuz. However, China, which has strong energy ties to Iran, is unlikely to align fully with Washington's pressure campaign, preferring to balance its own strategic and economic interests in the region alongside other powers like Russia.
This article is for informational purposes only and does not constitute investment advice.
[1] Trump says the US may 'heavily strike' Iran again, was 'only an hour away' from ordering it; Iran says it is prepared to deal with any military aggression[2] Strait of crisis: Iran’s dangerous gamble with global economy[3] Allianz Commercial: War becomes the number one political violence risk for more than 50% of companies globally[4] An optical visit[5] Trump-Xi Beijing Summit Signals a Fragile Reset in US-China Relations
