What is the base case oil price forecast for the Middle East conflict?

The base case assumes the war drags on with the Strait of Hormuz effectively closed for around 6 weeks, with Brent crude expected at $80-$110. Higher energy prices would crimp economic activity and keep central banks in wait-and-see mode, with portfolio positioning reducing exposure to sectors that suffer in lower demand environments.

What happens to markets if the Middle East conflict escalates?

The bear case sees escalation into other regions with prolonged attacks on major energy infrastructure, pushing oil above $120. This would cause sustained inflationary impact globally, with UK and Europe hit hardest and potential policy shifts from central banks. Portfolio positioning would meaningfully reduce global equity exposure and cautiously increase bonds.

What is the bull case for the Middle East conflict?

The bull case assumes Iran, the US and Israel reach a peace agreement or insurance premiums normalise enough to support shipping through the Strait of Hormuz. Oil would fall to $70-$80 and energy-related inflation pressures would ease, potentially creating opportunities in cheaper equity sectors.

Middle East Scenarios - Base, Bears and Bulls

stefanl6
Mar 23
2 min read

The heightened instability in the Middle East continues to influence the global market outlook, particularly through energy supply risks and inflation pressures. Our scenario analysis below sets out three potential paths - our base case (what we expect), the bear case and the bull case - each with differing implications for inflation, economic growth and market sentiment.

Across each of the scenarios, any portfolio changes we consider will be firmly based around our data driven investment process. The scenarios illustrate how different environments might affect positioning, but all decisions will continue to follow observed data, evolving risks and long term client outcomes.

The situation remains highly fluid and is continually evolving, therefore our underlying view may change also. In addition, this scenario analysis does not take into account other potential market risks or opportunities and is solely focused on the conflict in the Middle East.

As always, we recommend looking through the noise and retaining a long-term investment perspective despite short-term increases in volatility. Often the best days follow the worst days in markets and therefore remaining invested and not panicking can be key to achieving your long-term financial objectives.

Issued by Omnis Investments Limited. This update reflects the views of Omnis at the time of writing and is subject to change. The document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with your financial adviser. Omnis is unable to provide investment advice. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given. Past performance should not be considered as a guide to future performance. The value of investments and any income from them may go down as well as up and cannot be guaranteed. Prospective investors are reminded to read the fund's Key Investor Information Document and Prospectus prior to investment. These are available free of charge from Omnis Investments Limited. Omnis Investments Limited is authorised and regulated by the Financial Conduct Authority.