The New Baseline

For investors, the war in Iran has been a disaster. Far from delivering a decisive blow through an extensive bombing campaign, Iran appears more entrenched than ever. It retains significant influence over the Strait of Hormuz, and that chokehold on energy could tighten further if tensions spill into the Bab al-Mandeb strait.

Natural gas markets are under even greater strain, with LNG flows harder to reroute and increasingly vulnerable to shocks. Fertiliser prices are surging as feedstock and shipping routes come under pressure, quietly setting the stage for a second wave of food inflation. Wheat, corn and soybeans are already moving higher, with potentially far-reaching consequences.

Industrial metals are beginning to feel the strain as well. Copper is approaching its previous all-time highs, with aluminium, nickel and zinc following closely behind. Beneath the surface, less visible inputs such as sulphur and helium are also being disrupted, with knock-on effects for everything from agriculture to semiconductors.

This is no longer just an energy crisis, but a supply-chain disruption of unprecedented proportions. Markets are still clinging to the idea that an off-ramp will emerge, particularly with the midterms looming. However, the rhetoric suggests otherwise. Investors may soon have to confront a more uncomfortable reality: this isn’t a shock. It’s the new baseline.