The Middle East Is at War. Here’s What It Means for Every Asset Class in YourÂ
The world woke up to a fundamentally different geopolitical reality on Saturday morning. The United States and Israel launched a massive, coordinated military campaign against Iran — codenamed Operation Epic Fury by the Pentagon — striking Tehran, Isfahan, Qom, Karaj and cities across the country.
President Trump, in a pre-recorded address released as bombs fell, called it “a massive ongoing operation” and vowed to destroy Iran’s missile industry and annihilate its navy. The goal, stated plainly: regime change.
Iran has hit back. Hard. Missiles have struck US military installations across the Gulf — in Qatar, Bahrain, Kuwait and the UAE. Air raid sirens wailed across Israel. A prominent hotel in Dubai was hit. The Strait of Hormuz, through which roughly one-fifth of the world’s daily oil supply passes, has effectively become a war zone. Several oil majors suspended tanker shipments through the waterway within hours of the first strikes.
For investors, Monday’s market open will be among the most consequential in years. HSBC’s Global Investment Research team published a cross-asset briefing today, pulling together views on oil, foreign exchange and regional economic risk. The conclusions are measured but stark.
This Is Not Last Summer
Markets have a dangerous instinct to treat every Middle East flare-up as a replay of the one before. That instinct is wrong this time. When Israel struck Iranian nuclear sites in June 2025, the operation was contained and brief. Oil spiked, equities wobbled, and within days normalcy returned as Tehran’s retaliation remained symbolic.
The conditions today are materially different. Trump has explicitly framed this as an open-ended campaign. Iran’s response has already been qualitatively wider and more aggressive than anything seen in June. The diplomatic track collapsed almost overnight — Oman’s foreign minister had declared a breakthrough in nuclear negotiations just 24 hours before the bombs fell.
HSBC’s research team is candid about the limitstions.”We can have no conviction on how the situation in Iran may evolve following air strikes launched on Saturday, with the impact contingent on the duration of any conflict and how it extends to the broader region.”
Investors tempted to buy the dip too aggressively come Monday morning may have to be wary.
Oil: Burning
Iran pumps around 3 million barrels per day and exports roughly 1.9 million barrels per day despite sanctions, the overwhelming majority flowing to Chinese refineries. Losing that supply would be disruptive. What would be catastrophic is losing the Strait of Hormuz.
HSBC is explicit on this point: “Oil market risk is asymmetrical regarding possible Iran scenarios, with Hormuz transit the main concern. Spare capacity in the Mideast Gulf is significant but would not be accessible if Hormuz is closed.”
The Gulf’s spare production capacity — the world’s insurance policy against oil supply shocks — becomes irrelevant if the Strait is blocked.
HSBC maintains its Brent forecast at $65 per barrel for 2026 in a contained scenario. If tanker traffic through Hormuz is disrupted for any meaningful stretch that price looks modest.
For investors: energy equities with non-Gulf production exposure will reprice higher alongside crude. Airlines, industrials and any sector with direct fuel cost sensitivity face immediate pressure. The risk is asymmetric and skewed sharply to the upside for oil prices.
Currencies: Buy the Dollar, But Hold it Loosely
On foreign exchange, HSBC “s view is that “the USD is likely to have an upper hand in the near-term” — a classic safe-haven bid that is entirely predictable and almost certainly correct for the first days of trading.
But “This would stand in contrast to its performance during the war with Iran. Back then the USD’s knee-jerk strength proved to be very short-lived, as US policy uncertainty was a dominating feature that undermined the currency. This pattern led to discussions about whether the USD was losing its safe-haven properties.”
HSBC’s conclusion is that the dollar did not lose its safe-haven properties — but it did lose them temporarily, and for reasons that have not gone away. US policy unpredictability remains a structural headwind. “Geopolitical events can give confusing signals for currencies, not just for the USD,” the report notes. “Much depends on the conditions around rising geopolitical uncertainty that will determine the impact on the USD and other currencies.”
The cleaner safe-haven expression remains gold, which carries none of the political risk baggage now shadowing the dollar.
The Gulf and Wider Region: Sentiment, Capital Flows and Egypt
HSBC’s regional economists flag risks that broader markets are likely underpricing. The bank notes that while Gulf sovereign wealth and policy frameworks provide meaningful buffers, “any fresh conflict would test sentiment, activity and capital flows in the Gulf and challenge Egypt’s recent external account gains.”
Egypt is the tell here. Suez Canal revenues and tourism receipts — two of Cairo’s most critical foreign currency earners — face acute pressure if the conflict widens and shipping through the Eastern Mediterranean becomes entangled in the broader crisis. Egypt’s hard-won external account stabilisation over the past two years could unravel quickly in a prolonged war scenario.
The Bottom Line
HSBC’s note frames the key question precisely: everything hinges on duration and whether the conflict extends into the broader region. A short, contained operation produces a sharp spike and a reversal — the June 2025 playbook. A weeks-long regime-change campaign produces something considerably more damaging across equities, currencies and fixed income simultaneously.
That will destroy wealth.
