A marathon, not a sprint

Just when energy markets thought things couldn't get any more complicated, they did.

The Middle East conflict took another turn in recent days as Iranian-backed Houthi forces captured Yemen's Red Sea coastline, tightening their grip on the Bab el-Mandeb strait, while drone strikes on a key Saudi oil pipeline disrupted supplies equivalent to around 4% of global supply. Oil prices responded by climbing by over 3% on Monday to $108 a barrel.

Add in the collapse of talks between Gulf states on an Iranian-Omani proposal to regulate shipping through the Strait of Hormuz, and a sobering picture is emerging: this is no longer a short, sharp energy shock. Markets are increasingly pricing in a prolonged and unpredictable test of global economic resilience.

The Iran conflict has become an increasingly awkward political problem for U.S. President Donald Trump ahead of November's midterm elections. During a visit to Ireland on Sunday, which included both business meetings and a round of golf, Trump said he still expected the Iran war to end this year, possibly shortly after the midterms. When it does, he predicted, gasoline prices would "drop like a rock."