This week’s been an exercise of writing and rewriting this post as the markets react to different versions of the timeline for operations in Iran. As investors calibrate the potential economic impact of a prolonged or expanded conflict in the Middle East, oil prices have remained elevated and stock prices have declined.

Higher oil prices have historically accompanied conflict in the Middle East. Various sources estimate that 15-20% of global oil production – that of Saudi Arabia, Iran, Iraq, the United Arab Emirates, and Kuwait – flows through the Strait of Hormuz. The Strait of Hormuz borders Iran, the United Arab Emirates and Oman and its effective closure has caused production in the region to slow even as Saudi Arabia and the United Arab Emirates employ their pipelines to redirect oil to other trading routes.

At the outset of the conflict, prices of U.S. benchmark West Texas Intermediate crude and global benchmark Brent crude have surged to levels not seen since Russia’s invasion of Ukraine in 2022. Russia currently produces just over 10% of global oil – a similar level of production to Saudi Arabia. The United States continues to produce a record number of barrels per day amounting to more than 20% of global production. Canada (6%), China (4%), and Brazil (4%) are among the other significant global producers. Venezuela produces less than 1% of the global supply.

China is a major producer of oil, it’s also a major consumer, typically absorbing about 30% of the oil that flows through the Strait of Hormuz. Per the International Energy Agency (IEA) China, India and other Asian nations purchased roughly 80% of middle eastern oil in 2025. The economies are also major importers of liquid natural gas passing through the Strait of Hormuz.

While oil prices are up globally, the impact will not be felt equally across all regions. The same is true of natural gas the price of which has also surged as Qatar moved to shutter liquid natural gas (LNG) production in response to an Iranian drone strike. Qatar is the world’s largest exporter of LNG accounting for close to 20% of global supply. Asia is the primary market for Qatari LNG, though select European countries – including Belgium, Italy, and Poland – are also likely to experience impacts.

As individuals and families are discovering, the longer energy, heat, and fuel prices remain elevated, the greater the impact. That said, analysis by Apollo Global Management suggests the impact of a persistent shock – $100 oil through 2027 – on the U.S. economy results in higher headline inflation (+0.7%) with more modest outcomes in core inflation (+0.1%), unemployment (+0.1%) and gross domestic product (-0.1%).

As we publish, the major U.S. indexes are modestly negative year to date with international markets bearing more of the brunt of this uncertainty. Coming off a very strong 2025 for equities, most major markets remain arguably ahead of long-term expected returns.

Equity markets are volatile. Diversified portfolios should include shock absorbers like cash and high-quality fixed income to offset more volatile exposures through the inevitable peaks and valleys. For those without these important shock absorbers, there remains an opportunity to rebalance towards diversifying assets.

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Woe is Me, January 12, 2026
Investing for Impact, January 5, 2026
2025

Tide Cycle Resources (Tide Cycle) is an investment advisor registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. A copy of Tide Cycle’s Forms ADV Part 2 and Form CRS are available without charge upon request. The opinions expressed are those of Tide Cycle. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Nothing contained in this document may be relied upon as a guarantee, promise, assurance, or representation as to the future. This should not be taken as specific investment advice. We recommend consulting an investment/tax professional before making financial decisions based on any information provided.

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