Iran war sends global equities into stagflation territory

Five weeks of US-Iran conflict have triggered a global equity sell-off, with the S&P 500 down nearly 6% from its January peak and South Korea's Kospi falling almost 20%. Analysts at Goldman Sachs warn the probability of stagflation has increased, while a temporary truce announced in early April sparked a relief rally that analysts at Schwab say is mostly about unwinding speculative positions.

Bottom line — Goldman Sachs says real quarterly Stoxx 600 returns could fall to around -1% under stagflation.

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• The Strait of Hormuz has been effectively blocked since the conflict began, disrupting roughly 20% of global oil and LNG supply, per Defiant Capital.
• Brent crude surpassed $100 per barrel on March 9 for the first time since 2022, and oil prices have risen at a magnitude comparable to the 2022 Ukraine war shock, according to Defiant Capital.
• Economists cited by Defiant Capital estimate Brent crude could return to the mid-$60s per barrel by year end under a short conflict, or approach $130 per barrel in the second quarter if the war extends several months.
• Euro zone inflation jumped above the European Central Bank's 2% target to 2.5% in March, with officials expecting energy inflation to have hit 4.9%, per data cited by CNBC.
• Gold fell sharply in March and is headed for its worst monthly performance since 2008, but UBS Global Wealth Management forecasts it to climb to $6,200 per ounce by end of June.
• Schwab analysts note that even if the truce holds, physical damage to regional energy infrastructure means production and exports will take time to restart.
• Federal Reserve officials now appear to see the first 2026 rate cut pushed to the third quarter at the earliest, per Defiant Capital.

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