Markets hate uncertainty, and right now, investors are facing one of the most uncertain geopolitical backdrops in years. The escalation in the Middle East over the weekend has sent shockwaves across asset classes, writes eToro analyst for Romania, Bogdan Maioreanu.
The conflict between the US and Iran has triggered a sharp rise in oil prices and a flight of capital into safe assets such as gold and the US dollar. Now the critical question for traders and investors is how long this disruption will last. While being far from the conflict, the situation in the Middle East might bring some risks to the Romanian economy that is already battling high inflation.
Oil is the immediate flashpoint. Brent crude surged to over $84 this morning with the news of the closure of the Strait of Hormuz. Through that narrow path passes around 20% of the world’s crude oil and liquefied natural gas every single day, and tanker traffic through the waterway has ground to a near halt. The European natural gas futures prices reached 60 euros per MWh and are also under pressure after Qatar halted production. Only last Friday, before the attacks, the price was almost 32 euros per MWh.
Markets try to determine whether what is happening is a pricing problem induced by a temporary geopolitical risk premium or a quantity problem from a possible sustained disruption that can impair delivered energy supply. Each possibility determines how the shock transmits through asset classes.
If the oil supply at the global level keeps flowing despite higher security risks and insurance costs, markets will likely treat the situation as temporary. Oil prices may spike, but they probably won’t stay much higher unless inventories fall significantly. Any inflation impact would be limited and short-lived. However, if oil supply is seriously disrupted — due to major transit delays, contract cancellations, or credible security threats — the impact becomes economic, not just psychological. In that case, oil prices could quickly rise into the $80–$110 range and stay elevated. Inflation expectations would increase as higher energy costs feed into transport, production, and consumer prices.
There are buffers in place that should prevent a worst-case scenario from playing out immediately. The global oil market entered this conflict in a position of relative oversupply. OPEC+ announced a production increase of 220,000 barrels per day for April, and major consuming nations like the US and China hold significant strategic reserves. Saudi Arabia also has pipeline capacity to reroute some exports away from the Gulf. This offers a partial salve, but these are short-term cushions rather than long-term solutions, and if tensions persist, the upward pressure on oil prices will feed directly into transport costs and ultimately inflation across the global economy.
Despite being relatively far from the conflict, Romania might also feel the impact of an increase in oil and natural gas prices in different areas of the economy: from the prices at the pump to a spike in inflation due to energy prices increasing spillover to the cost of transportation and to other categories of products and services. Currently in a technical recession, Romania is vulnerable to the risk of external shocks, including further energy‑price volatility and trade‑policy disruptions affecting the EU export channels, which could prolong the recessionary phase. In its latest report, NBR is already seeing inflation in the second quarter of this year beyond its initial projection, with the main factors responsible being the base effects from the energy segment, as well as the increase in the prices of certain commodities and basic foods. The current effect of the Middle East crisis might make the mission of the National Bank of Romania to contain inflation even more difficult.
As the situation in the Middle East is fluid, investors will have to follow closely what is going on there and keep their cool. Market volatility during periods of conflict is both natural and expected. History shows that markets adjust, reprice risk, and ultimately may move forward. Rather than focusing on what might happen tomorrow, investors should ask whether their strategy was designed to withstand moments like these. Discipline, diversification, and rational decision-making remain the most effective tools for navigating uncertainty.
