Iran and the New Geopolitical Shock: Implications for the Global Economy
March 17, 2026
By Mario Catalá
The war unleashed after the joint US-Israeli operation on Iranian territory has abruptly altered the macroeconomic scenario projected for 2026. The conflict has increased the risk premium on commodities such as oil and gas, reigniting volatility in financial markets and temporarily relegating traditional macroeconomic data to the background—a situation we expect to persist at least until the duration and intensity of the geopolitical shock become clearer.
The temporary closure of the Strait of Hormuz, through which approximately 20% of the world’s crude oil and liquefied natural gas transit, has caused energy price spikes that at times have exceeded 60%, pushing Brent crude toward $120/barrel. However, despite the severity of the shock, the global economy is now in a more resilient position than in past crises, given the United States’ greater energy self-sufficiency and the existence of logistical alternatives such as pipelines to the Red Sea, as well as greater international coordination to release strategic reserves (as announced by the G7 members).
Nevertheless, we remain very attentive to the development of the armed conflict, paying particular attention to its potential duration and intensity. The baseline scenario, with an intense but short-lived conflict, would likely prevent systemic damage, but a more prolonged conflict, leading to a sustained increase in energy prices, could cause a significant deterioration in global growth, additional inflationary pressures, and changes in central bank policy.
In this context, and regarding portfolio positioning, at Portocolom we believe the best option is not to overreact to increases in volatility, given the historically proven difficulty of re-entering the market after a hasty exit in environments of extreme movements caused by armed conflicts. In any case, given the growing geopolitical tensions we have been experiencing for over a year, we had already decided to take precautions by reducing our structural exposure to equities, a positioning we continue to maintain today.
Turning to a purely macroeconomic perspective, the conflict erupted at a time when the United States was showing mixed signals. PMIs continued to expand (the manufacturing PMI rebounded to 51.6, and the services PMI fell to 51.7, although both maintained a positive bias), while the GDP forecast for the fourth quarter of 2025 surprised on the downside, reaching 1.4%, impacted by the 43-day federal government shutdown. Consumer spending has begun to weaken slightly (January retail sales fell by 0.2%), in a context where the labor market is going through a critical moment. The release of the February non-farm payrolls data showed an unexpected loss of 92,000 jobs, compared to the expected increase of 58,000, despite a more constructive ADP survey (+63,000 jobs). The unemployment rate, meanwhile, rose to 4.4%, with a participation rate of 62%, lower than in previous months.
Regarding inflation, the war in Iran has altered the expectation of control with which the year began (headline CPI at 2.4% and core CPI at 2.5%), and the Cleveland Fed’s projections reflect this, estimating a headline CPI of 2.87% for March (2.60% at the core level). Market consensus estimates that increases of around 10% in the price of Brent crude imply an additional rise in inflation of approximately 0.2%, so sustained high oil prices could delay or even halt future interest rate cuts by the Fed. In fact, the next Federal Reserve meeting, scheduled for March 18, does not point to any changes, and the market consensus, which no longer anticipates imminent cuts, has shifted to a debate between potentially rising inflation and a visible deterioration in employment. The geopolitical shock revives a dilemma similar to the one experienced in July 2025, but now with an underlying energy risk.
Europe is possibly the region most vulnerable to the Iranian shock due to its high energy dependence, and although the PMIs had been offering a somewhat more constructive picture (the manufacturing PMI returned to expansion at 50.8, and the services PMI advanced to 51.9), GDP for the fourth quarter of 2025 remained at 1.2%, slightly below expectations. Furthermore, consumption remains weak, with January retail sales falling by a tenth of a percent (0.1%), and ZEW investor confidence data dropping to 39.4, reflecting uncertainty about interest rates due to the energy impact.
After declining in January, inflation rebounded in February, with headline CPI reaching 1.9% and core CPI 2.4%, exceeding the 2% target. Inflation expectations via swaps have increased significantly, as Europe is particularly sensitive to high oil prices, as mentioned earlier.
The European Central Bank will meet on March 19th and is expected to maintain interest rates, with the deposit facility rate at 2%. The institution is currently maintaining its wait-and-see strategy, although this will now be heavily influenced by energy price volatility. The market has clearly already reacted, shifting from anticipating rate cuts to expecting at least one rate hike in 2026, should further inflationary spikes occur.
In conclusion, the conflict that began two weeks ago in Iran represents a significant geopolitical shock, with immediate effects on energy prices and, consequently, inflation. Therefore, increased market volatility is inevitable. Although there is a sense of global economic strength, particularly due to the greater energy self-sufficiency of the US and its international logistical diversification, the duration of the conflict will determine its ultimate impact on economic growth and prices. In this context, the United States may have a slight advantage over European and Asian economies, which exhibit greater energy dependence and economic fragility.