Three Thoughts on the Continuing War in Iran
Author: Pulkit Sabharwal
March 23, 2026
The U.S. and Israel war against Iran continues to rattle global energy markets after more than three weeks of intense fighting. With no end to the conflict in sight, the possibility of even more volatility in oil and gas prices may lie ahead.
Here, Pulkit Sabharwal, AGF Investments’ equity analyst, identifies three facets of the war that could have implications for investors seeking to navigate these troubled times.
Energy Assets: Eyes on the Target
Energy infrastructure and assets seemed to be off limits as potential targets of air strikes in the early days of the war, but that stance seems to be waning following the U.S. attack of military assets on Kharg Island, Iran’s main oil exporting hub, and Israel’s targeted hit of the South Pars gas field, which has led Iran to warn of retaliatory strikes on select refineries and petrochemical complexes across the broader Middle East region. While these attacks and threats have been limited to lower-risk assets that represent secondary revenue streams for those who own them, they have nonetheless contributed to another spike in oil prices and may be an ominous step towards the targeting of oil production facilities in the region. That would almost certainly result in higher oil prices from today’s already elevated levels.
Asia’s Economy: In the Crosshairs
It should be no secret that oil prices have spiked dramatically over the past three weeks. This is particularly true of the world’s two most popular benchmarks, West Texas Intermediate (WTI) and Brent. But what might be less obvious to investors is just how much the real delivered price for oil has spiked, especially across Asia, where oil markets are overly reliant on shipments travelling through the Strait of Hormuz, which has been effectively closed because of the war. Indeed, trading hubs in Dubai, Oman and Singapore are transacting at oil prices ranging between US$140 and US$165 a barrel, and energy spending across many Asian economies is now approaching 5% of GDP—a percentage that has historically been associated with recession. To combat this growing risk, some countries, including the Philippines and Thailand, have started instituting energy reduction measures, including the return of work-from-home mandates and restricting exports. Still, it’s unclear whether these efforts and other potential tactics are enough to prevent a significant economic slowdown if the war continues for much longer.
Diesel Prices: Further Fuel for Inflation
There is no denying the potential impact that higher oil prices could have on inflation, but the even higher spike in diesel prices may end up being a contributing factor that investors may want to consider as well. While it’s not surprising that attacks on refineries have contributed to higher price increases for oil products like diesel than for oil itself, the disproportionate spike can also be attributed to diesel being in short supply even before the war began. On top of that, the U.S. and North America generally are net importers of the fuel, typically associated with heavy-duty transportation, commercial machinery and high-efficiency, high-torque engines.
The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.
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