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A major U.S.-Israel operation in Iran disrupted global markets, with energy prices and investor sentiment shifting as the situation unfolds.
March 2, 2026
Latest developments
The United States and Israel have launched a major combat operation across Iran, prompting retaliatory missile and drone attacks from Iran targeting Israel and U.S. bases. This escalation has driven significant volatility across global markets, especially in energy.
Market reaction and implications
The immediate consequence for capital markets is a repricing of risk, with the magnitude of change contingent on the reaction of other oil-producing nations and the extent of Iran’s response. Iran produces approximately 3.3 million barrels of oil per day (3% of global production)1 and is the fourth-largest producer in The Organization of the Petroleum Exporting Countries (OPEC). OPEC and other oil-producing countries are expected to increase supply, but not enough to offset a full loss of Iran’s production. The International Energy Agency (IEA) estimates that Saudi Arabia controls most of the world’s excess capacity at 1.8 million barrels per day.
Of greater significance is the Strait of Hormuz, through which roughly 20% of global oil supply passes. Iran sits on one side of the Strait and may look to restrict the waterway following the attack, though its ability to enforce closure may be limited. Any sustained disruption could send crude prices higher, with implications for global growth, inflation, and fiscal and monetary responses. An oil supply shock is now the most likely risk scenario.
Lower energy prices in 2025 were a tailwind for spending growth and sentiment; geopolitical risk has now manifested in actual conflict resulting in higher oil prices and a headwind for business and consumer spending. CIBC Private Wealth, US, is reviewing our commodity exposure and considering tactical positions, while remaining mindful that a broader conflict-driven demand destruction scenario could limit returns. One constraint on the length of the operation and volatile oil prices could be the midterm elections in November. High prices at the pump may weaken public support for the campaign.
Beyond the energy sector, immediate market reactions may include outperformance for defensive assets such as U.S. Treasuries, precious metals, “safe haven” currencies, and defense and aerospace sectors. Conversely, consumer-cyclical, travel, and shipping-related names could experience greater volatility. The situation remains fluid, and the initial market response may differ from medium- or longer-term outcomes. Underlying conditions place the economy in a strong position to absorb the impact of a temporary rise in energy prices, and increased market volatility may also present opportunities.
We will continue to monitor developments and provide timely market updates, as appropriate. If you have any questions, please do not hesitate to contact a member of your CIBC Private Wealth team.
1. Bloomberg
