Market Review 9th March 2026
- Simplicity News Desk
- 20h
- 5 min read
Everything you need to know, Simplified!
Summary
The conflict with Iran escalated sharply, with drone and missile strikes disrupting traffic through the Strait of Hormuz (a critical passageway for oil supplies), raising the risk of a prolonged regional conflict
Energy markets reacted violently, with Brent crude rising to US$108 / barrel (bbl) and UK natural gas surging to £1.57/therm (a unit of British thermal energy, leaving both commodities dramatically higher year- to-date
Financial markets outside of energy struggled, with global equities falling around 3% in GBP terms while the US dollar, currently the purest safe haven, strengthened
Bond markets sold off sharply, particularly in the UK, as higher oil and gas prices revived concerns about a renewed inflation shock
Despite the market reaction, the macro backdrop differs significantly from 2022, with inflation falling, monetary policy restrictive and the labour market weakening
As the war enters its second week, investors will focus on the risk of prolonged disruption to the Strait of Hormuz, the trajectory of the conflict and the potential for Russian oil to fill supply gaps created by Middle Eastern instability.
Market Review
Two energy shocks, two opposite reactions
The conflict with Iran intensified last week as Iranian strikes targeting Gulf states expanded. US President Trump stated he is not interested in negotiations and that the US will not stop short of Iran’s unconditional surrender after an Iranian drone strike on a military base in Kuwait killed six US soldiers. Regime forces continue to fire on protesters while Tehran has vowed to escalate attacks further. Missile and drone strikes have also disrupted commerce through the Strait of Hormuz, paralysing both ocean and air traffic. The selection of Mojtaba Khamenei, the son of Ayatollah Ali Khamenei, as the new Supreme leader suggests no change to the current trajectory of the war.
The crisis sent energy prices sharply higher. By this morning Brent crude had risen to $108/bbl, now 77% higher for the year, while UK natural gas surged to £1.57/therm, up 103% this month and 160% year-to-date.
There are risks that the conflict proves persistent. Iran is believed to possess a large stockpile of relatively inexpensive Shahed drones, which can be transported and launched from civilian vehicles that are difficult to identify. With individual drones costing only a fraction of the interceptor missiles required to destroy them. In such a scenario, energy markets could remain volatile for an extended period.
Across financial markets outside of energy there was nowhere to hide. Even other commodity markets struggled, with gold, silver and copper all ending the week lower. Global equities closed -3.0% in GBP terms, cushioned slightly by a strengthening US dollar. Indeed, the dollar increasingly appears to be the purest safe-haven trade at present.
The most notable deterioration has been in the bond market, particularly UK government bonds, which have sold off sharply in response to the inflationary implications of higher oil and gas prices. The UK appears particularly vulnerable. Gas inventories are unusually low and substantial replenishment is required at elevated prices, raising fears of a sustained energy-driven price shock.
The Telegraph reported over the weekend that the UK has only two days of natural gas supply compared with weeks of inventory across continental Europe and that the UK currently pays the highest wholesale energy prices of any country globally.
There is a notable comparison between this crisis and the one in 2022. When Russia invaded Ukraine and energy prices surged, UK inflation was already 6.2% and rising, driven by strong demand. The Bank of England (BoE) had only just begun tightening policy, raising rates to 0.5% that same month. The real policy rate was therefore deeply negative at -5.7%. The BoE was behind the curve, the labour market was extremely tight and wage growth was accelerating. The energy shock was hitting an already overheating economy.
Yet the bond market reacted positively to Russia’s invasion. The two-year gilt yield fell from 1.3% to 0.8% in a matter of days as markets focused entirely on the growth shock and ignored the inflation risk.
Compare that with last week’s energy surge. Inflation in the UK is now 3.0% and falling. The BoE is coming down from a restrictive policy stance with the Bank Rate at 3.75%. The economy is losing momentum and the labour market is soft. Unemployment is above 5%, the highest since the pandemic, while youth unemployment is approaching 16%.
Despite this very different backdrop the bond market reaction was severe. The two-year yield rose from 3.52% to 4.09% (where it as the time of writing this morning) and markets erased the probability of a rate cut later this month from around 90% to 0%. The market reaction suggests investors may be fighting the last energy crisis rather than the current one.
An energy shock is a textbook supply-side shock. While a prolonged conflict could eventually generate sustained inflation, there is currently no clear mechanism through which this shock would translate into a wage or demand-driven spiral.
Interest rates work by increasing the cost of debt and suppressing demand. In the absence of excessive demand it is difficult to see why the BoE should not look through this energy shock and maintain its dovish momentum.
The greatest danger in times of turbulence is not the turbulence. It is acting with yesterday’s logic and this isn’t 2022 - yet.
The week ahead
As the Iran conflict enters its second week, three questions increasingly dominate the outlook for energy markets and global risk assets.
How does the war end?
As the conflict enters its second week and continues to escalate the outlook from here depends on several key variables: the remaining scale of Iranian missile and drone capabilities, the resilience of Gulf air defences, the degree of US military resolve and the ability of shipping routes to normalise. Even a limited number of projectiles could continue to disrupt traffic through the Strait of Hormuz or damage regional energy infrastructure, meaning that a prolonged period of volatility in energy markets cannot be ruled out.
Will there be a battle for the Strait of Hormuz?
The Strait remains the single most important strategic chokepoint for global energy markets with an average of 20 million barrels passing each day (around a fifth of global supply). President Trump has offered US naval escorts and insurance guarantees for tankers transiting the waterway, but Iranian threats continue to paralyse trade. Even if the US military were able to reopen the Strait, Iran could still attempt to disrupt traffic again. With 4.5% of all global trade historically passing through the Strait disruptions will affect broader global trade.
What does this mean for Russian oil?
The conflict has strengthened demand for Russian crude. The Trump administration has already granted India a sanctions waiver to continue purchasing Russian oil, reflecting concerns about the impact of Middle Eastern disruptions on global energy prices. In practice, Asian buyers were already turning to Russian barrels as Gulf supplies became less reliable, suggesting that Russia may benefit economically from the conflict even as geopolitical tensions rise.
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