The war in Iran and the effective closure of the Strait of Hormuz have plunged global energy markets into deep uncertainty, disrupting critical oil and gas flows, according to research from six sources. Energy shipments from the Middle East have been at a standstill following Iran's threats to attack vessels that pass through a critical trade waterway as retaliation against US-Israeli strikes, multiple reports indicate. Oil prices have at points soared to close to $120 a barrel, pushed up by strikes on shipping and energy infrastructure and the effective closure of the Strait of Hormuz, the world's busiest oil shipping channel.
Southeast Asia faces fuel shortages and rationing that threaten industrial activity due to the Strait of Hormuz crisis, research shows. The blockade has led to a global oil shortage which has rocked Gulf-reliant Asian countries hard, with the Philippines mandating four-day work weeks to save fuel, and Indonesia seeking ways to avoid burning through reserves that will last just weeks. China, the world's largest buyer of oil, is also feeling the strain from the oil shortage, according to multiple reports.
China is managing domestic stockpiles while balancing exports to key trading partners, exposing vulnerabilities across its supply chains, research indicates. China uses an estimated 15 to 16 million barrels of oil daily, various market analysts told the BBC. Gulf countries are a major source of the oil China ships in, with barrels from Saudi Arabia and Iran accounting for more than 10% of its imports each, according to the US Energy Information Administration. Russian oil accounts for nearly a fifth of China's energy imports, making Moscow by far Beijing's biggest oil supplier, despite sanctions from the US and Europe, according to research.
Europe is confronting soaring energy costs that strain households and industry, heighten inflationary pressures, and force policymakers to trade off short-term relief with long-term transition goals, research shows. EU equity market performance over the last months was characterised by high volatility, at levels not seen since the COVID-19 related market stress, according to multiple reports. Overall, EU market performance as of end-June stood at +11% since the beginning of the year, amid significant sectoral heterogeneity, research indicates.
Africa grapples with higher fuel and fertilizer prices that exacerbate food insecurity, even as the conflict opens opportunities for oil, gas and infrastructure investment, according to research from six sources. The crisis compounds existing economic challenges across the continent, where many nations are heavily dependent on imported energy and agricultural inputs. However, some African energy producers may see increased interest from international investors seeking to diversify supply chains away from the Middle East.
The crisis is creating new opportunities for energy producers across the United States, Canada, Brazil, and Guyana to expand production and attract investment as demand for secure, diversified supply intensifies, research shows. These Western Hemisphere nations are positioned to increase output to meet global demand disrupted by the Middle East conflict. Investment is expected to flow into both conventional and renewable energy projects as countries prioritize energy security.
About a fifth of the world's oil passes through the Strait of Hormuz, around 20 million barrels each day, according to estimates from the US Energy Information Administration. This strategic chokepoint is critical for global energy flows, and its closure has immediate ramifications for markets worldwide. The specific actions constituting the effective closure remain unclear, but the impact on shipments has been severe.
UK retail investors added a modest £438 million to funds in June 2025, bringing total inflows for the first half of 2025 to £2.9 billion, according to data published by the Investment Association. The first six months of 2025 saw a tough Q1 with outflows of £1.9 billion, giving way to a much more positive Q2 with inflows of £4.8 billion, research shows. H1 inflows of £2.9 billion in 2025 compares to £1.7 billion over the same period in 2024, indicating a recovery despite ongoing volatility.
A turbulent geopolitical backdrop polarized investor behavior, with some taking advantage of market volatility through April and 'buying the dip', boosting sales to North American equities, according to research. Others preferred caution and portfolio diversification, opting for European equities or funds that are managed to volatility targets, multiple reports indicate. Growing interest in European assets reflects capital shifting away from the US, research shows.
Mixed Asset funds saw £2.6 billion inflows recorded in H1 2025, highlighting the attraction for some investors of leaving allocation decisions to professional investment managers in times of uncertainty, according to research. Mixed Asset saw inflows of £502 million in June 2025, with rare inflows recorded into the Mixed Investment 0-35% shares sector, multiple reports indicate. This category has served as a safe haven amid the market turbulence driven by geopolitical events.
Equities saw heavy outflows of £1.0 billion in June 2025, a shift from £549 million inflows in May, research shows. North America was broadly flat in June 2025 with £52 million in net flows, split by inflows of £192 million into larger-cap strategies and outflows of £140 million from smaller companies, according to multiple reports. Fixed income funds added £193 million in June 2025, down from £1.1 billion in May, while Money Market funds recorded £823 million in inflows in June 2025, marking a fifth consecutive month of positive flows with a net total of £4.3 billion.
Index trackers saw £1.1 billion in inflows in June 2025, mostly into equity exposures across Europe, Global, and North America, with UK equity tracker activity remaining muted, research indicates. Responsible Investment funds faced further outflows in June 2025, with £447 million from SDR-labelled strategies and £365 million from wider responsible funds, according to multiple reports. This divergence suggests investors are prioritizing traditional market exposures over ESG considerations during the crisis.
The North America region saw £2.3 billion in net inflows over the first half of 2025, research shows. The Energy, Financials, Materials and REIT sectors in the GCC region experience the highest shock spillover from the U.S. and European equity market uncertainty for the overall and long-term investment horizons, according to multiple reports. This highlights how volatility in major markets transmits to regional sectors.
All five disaggregated global financial stress indicators and Bitcoin investors' Sentiment Indices transmit higher shocks spillover towards the sectoral stock conditional volatility of Energy and Materials sectors for the overall and long-term investment horizons, research indicates. Overall shocks spillovers are higher in long-term and intensified during the COVID-19 period, according to multiple reports. Financial stress and crypto sentiment are thus spilling over into traditional energy and materials markets.
In the first half of 2025 securities markets experienced pronounced volatility as global uncertainties intensified, notably with escalating trade conflicts, research shows. Equity valuations saw sharp falls and fast recovery in April related to the US tariff announcements, according to multiple reports. Geopolitical risk is exerting a heightened influence on fragile investor sentiment, research indicates.
EU equity market performance over the last months was characterised by high volatility, at levels not seen since the COVID-19 related market stress, research shows. ESMA sees high or very high risks in the markets within its remit, and retail and institutional investors should remain alert to potential sharp market corrections, and to the liquidity strains they could entail, the European Securities and Markets Authority said. The exact timeline and causes of these geopolitical events impacting markets remain unclear, but their effects are evident in fund flows and volatility metrics.
In fixed income markets, escalating trade tensions led to a significant widening of corporate bond spreads in early April, particularly in the high-yield segment, according to research. Market metrics of credit quality worsened in April with the geopolitical developments, and Moody's downgraded the US to Aa1 in May, multiple reports indicate. This reflects broader stress in credit markets amid the uncertainty.
Investor risks have also risen in crypto-asset markets, where exuberance has been fuelled by political developments in the US and the emergence of new, high-risk business models, research shows. Despite a 10% drop in valuation in 1H25, crypto markets remain near their historical peak volume at EUR 3 trillion, according to multiple reports. The US administration's approach to crypto-assets has boosted investor sentiment, research indicates.
In 1H25, EU funds experienced their highest episode of volatility since the COVID-19 outbreak but exhibited positive performance amid muted flows, research shows. This resilience occurred despite the energy crisis and trade conflicts, though the specific measures governments are taking to address market volatility have not been detailed.
Greenland tensions drove a flight from equity funds in January 2026, marking a weak start to 2026, with outflows totalling a net £697 million during the month, after a calmer December, according to the latest Fund Flow Index from Calastone. January 2026 extended the bout of net selling to an unprecedented eighth consecutive month, research shows. The escalation in late January 2026 marked a clear turning point in monthly flows, according to multiple reports. The nature of these Greenland tensions remains unspecified, but they clearly impacted investor behavior.
European and UK equity funds bore the brunt of selling in January 2026, with other regions largely unaffected, research indicates. This regional focus suggests localized concerns driving the outflows, possibly linked to the broader geopolitical landscape. Fixed income and mixed assets remained steady amid equity weakness in January 2026, according to multiple reports, highlighting a flight to safer assets during the period.