Traders work on the floor of the New York Stock Exchange during afternoon trading on June 10, 2026 in New York City.
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As conflicts in the Middle East flare up again, investors are increasingly concerned about the possibility of prolonged conflicts and prices in the “longer period.”
The latest escalation comes after the US Central Command attacked Iranian forces, in retaliation for Tehran’s attack on the Gulf states on Thursday.
US futures were higher, although markets in Asia were lower. Oil, which ended up nearly 2% on Thursday, remained below $100 a barrel as traders still see enough buffers in the market to prevent a shock to overall supply.
Despite disruptions to shipping through the Strait of Hormuz, other export routes, the increase in US energy exports and the release of the oil plan have helped ease the crisis.
For investors, the biggest challenge could be a world where energy costs remain high, while borrowing costs remain high. The conflict with Iran, which the US said will not be “endless”, looks like it is getting longer and longer, if it does not turn into an “eternal war.”
“The eternal war label misplaces the emphasis. Wars rarely last forever, but risk premiums can,” said Billy Leung, investment strategist at Global X ETFs.
“As arbitration subsides and strikes resume, markets have moved from price fixing to long-term pricing,” he said.
As each new exchange of strikes makes a diplomatic decision look less likely, markets are bracing for a longer conflict. The result may not be a sharp decline, but it may be something permanent: a world where investors demand a higher premium for country risk, even after the headlines fade.
Leung said investors are no longer treating the dispute as a short-term inflation shock. Instead, markets are repricing money in a world of heightened political uncertainty.
“A war that lasts for a long time ends the time to buy everything and be rewarded,” he said. “Because of the cost of energy and the real cost of capital going up, the wage barriers are going up a lot.”
With arbitration collapsing and strikes resuming, markets have moved from strike pricing to long-term pricing.
Benjamin Jones, head of global research at Invesco, said the company’s issue remains a “status quo” situation characterized by ongoing strikes rather than an unending war. Equity markets largely followed the traditional geopolitical playbook, he noted: “they sold off and recovered.”
“We take this as a reminder to investors that staying invested is often the best course of action amid volatility,” Jones said.
Fitch Ratings this week lowered its outlook for the global private sector to “deteriorate” from “neutral,” citing the impact of the US-Iran war. The rating agency expects the conflict to weaken global growth, raise bond prices and yields, and increase sovereign risk.
“The US and Iran believe that time is on their side and they are not interested in agreeing to agreements that cross each other’s red lines,” Andy Lipow, president of Lipow Oil Associates, told CNBC.
“The crisis can continue for a long time no matter how many bombs the USA drops on Iran,” he added.
