Iran

Hopes for an imminent Middle East de-escalation have capped oil prices in recent weeks, but that restraint may soon fade.

The surprisingly solid ceasefire between Iran, the US, Israel, and GCC countries broke on May 4 with a ballistic missile and drone attack against the UAE. According to reports, UAE defense forces intercepted 12 ballistic missiles, three cruise missiles, and four drones, launched by Iran. 

The UAE’s exit from OPEC is unlikely to impact oil markets in 2026. Over the longer term, however, the emergence of an “anti-OPEC club” of producers favoring unconstrained oil output growth would create a headwind to crude prices and weaken the price floor that OPEC seeks to defend.

The Iran war is likely to re-escalate later this year even if shipping somehow resumes in the very near term — and yet an early reopening is looking less likely.

The longer the Strait of Hormuz remains closed, the more likely the Eurozone will experience an economic recession, as higher energy prices, supply chain disruptions, and weaker global demand slowly grind the European economy to a halt. The relief rally is running out of time. Investors should add exposure to the best-performing sectors following past oil supply shocks: Energy, pharma, and utilities.