The ongoing conflict in the Middle East is causing volatility in the commodities markets, especially Oil futures. Any news regarding ceasefires, blockades and ongoing events is rapidly reflected in financial markets. Brent crude oil is where most volatility takes place.
This article breaks down how global markets are affected by oil’s volatility and what that could mean for capital allocation in both crypto and finance.
Impact on oil and gas companies
The recent confusion in the Middle Eastern conflict where Iran opened the Strait of Hormuz, before closing it down 24 hours later, generated a lot of volatility. Brent Crude Oil prices have dropped from highs of $110 to lows of $85.
It wasn’t a short-lived instance as Oil prices spiked back up over $95 before the US market opened. At the same time, the world’s largest oil companies are benefiting from the higher premiums they are charging.
According to recent data, major oil and gas companies could generate approximately $234 billion in excess profits by the end of 2026. This is assuming oil prices remain consistent over $100 per barrel and supply shortages continue to mount.
With less crude oil able to pass through the strait, international and state-owned giants such as Saudi Aramco, ExxonMobil or Gazprom are capitalizing on the surge. Not only that, but even the 4th world energy producer: Cenovus Energy, is expected to increase its revenue in 2026 off the higher oil prices.
The profitability comes with increased scrutiny and potential regulatory risks.
Consumer and government responses
The EU has directly emphasized not to subsidize oil expenses for the population as it would have a negative effect in the near future – driving inflation for most countries. However, as oil prices are directly impacting consumer costs, inflation is already projected, but not yet priced in.
Even so, some EU countries have decreased taxes to relieve struggling consumers. These rules are temporary, but if oil prices continue to climb as supply shocks take hold, the situation could spiral. The EU has already announced that higher prices could lead to disrupted flights during the summer period.
European ministers are exploring excessive windfall taxes on oil and gas companies to redistribute massive corporate gains. For reference, the US has already levied sanctions on Russian oil refineries to keep the price of gas in check. Ultimately, policymakers view this volatility as a strong catalyst to accelerate investments in homegrown renewable energy – and not incentivize more fossil fuel usage.
At the same time, European ministers are exploring excessive windfall taxes on oil and gas companies to redistribute massive corporate gains and ease the public’s financial burden. By transitioning away from fossil fuels, economies can better insulate themselves from future geopolitical shocks and price fluctuations.
Geopolitical factors driving the market
The possibility of US-Iran peace talks has temporarily cooled the market, with Brent crude oil prices dropping below $100 for the first time in over a month. Ongoing comments from both the US and the Iranian administrations have kept the price stable. Moreover, the partial ceasefire along with the strait opening alleviated pressure as the market expected regular and consistent flow through the Hormuz Strait.
A second factor which helped oil prices remain at “acceptable” levels was the renewed waiver allowing countries to partially purchase sanctioned Russian oil. This move seeks to stabilize global energy prices and prevent further supply shocks.
However, recent developments have put renewed pressure on oil. Attacks have taken place in Iranian waters following the closure of the Strait of Hormuz. The US blockade is threatening the possibility of peace talks as markets expect the conflict to continue.
This highlights the delicate balancing act governments face when trying to punish adversaries without crashing the global economy.
The EU’s perspective and market resilience
European markets felt the immediate sting of this energy shock, with leading stock indexes experiencing significant sell-offs. But how does this compare to previous disruptions? EU diplomats report that Europe is actually much better prepared today than it was during the 2022 energy crisis. Thanks to strategic infrastructure upgrades and a more diverse portfolio of suppliers, the European Union boasts improved economic resilience.
Current EU strategies to combat inflation and price surges include coordinating with the European Central Bank to manage macroeconomic impacts, discussing the potential release of strategic emergency oil stocks (currently holding over 1.2 billion barrels), and doubling down on clean energy infrastructure to secure long-term independence.
Oil volatility and portfolio
The multifaceted impacts of the Iran conflict extend far beyond the oil rigs. Higher energy costs drive inflation, increase regulatory response and create unfavorable scenarios for risk-on assets.
For European investors it underscores how relying on a single investment avenue can backfire in periods of geopolitical volatility. At the same time, holding onto fiat isn’t as lucrative since inflation drives purchasing power even lower. Yieldfund, a quantitative trading company, offers investors ways to diversify without having to trade themselves.
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