How Iran war could impact oil, equities, forex: HSBC shares 3 scenarios

HSBC outlines three Iran war scenarios that could drive oil above $100, affect stocks, bonds and currencies as global markets react to ongoing conflict

HSBC view: Impact of Iran-Israel-Us war on stocks, bonds, currencies, oil prices

  The aggressive military actions of Israel, the United States, and Iran in West Asia have upended the global economic outlook. Investors, globally, are assessing the repercussions of the ongoing Iran-Israel-US war, which began on February 28, 2026, with joint US-Israeli strikes on Iranian targets. 

According to analysts at HSBC Global Investment Research, the future trajectory of oil prices, stocks, bonds and currencies, amid Operation Epic Fury (called by the US) and Operation Rising Lion (called by Israel), hinges on the extent and duration of the conflict.

  "While a limited escalation may see market volatility subside and prices stabilise, a prolonged or sharply escalating war could push oil significantly higher, depress equities in sensitive sectors, and boost safe-haven demand across fixed income and currencies," the global brokerage said in a note. 

 

Given this, HSBC has outlined three broad scenarios for how the conflict may unfold, and what could be the impact on oil markets, stocks, bonds and currencies.

 

Why is markets worried about Iran-Israel-US war?

The war in West Asia has disrupted energy shipping routes, and increased geopolitical risk, leading to volatility across commodities, equities, bonds, and foreign exchange markets. 

At the heart of the economic impact is the closure of Strait of Hormuz, a strategic maritime passage that handles about 20 per cent of global crude oil and liquefied natural gas shipments. 

  Closure of the sea route has triggered supply-side concerns, pushing Brent crude prices above $80 per barrel-mark.  ALSO READ | Iran-Israel-US war impact: Dubai stock market drops 5%; Israel hits record 

How will the West Asia war affect stocks, oil, bonds, and currency markets?

Scenario 1: Limited escalation

According to HSBC, if the two sides limit their attacks and the war does not significantly disrupt energy supply chains, then oil markets may be able to absorb the shock without dramatic price spikes, keeping Brent crude prices relatively close to pre-conflict levels. 

In this outcome, risk premia on energy would moderate, and broader risk assets such as equities could stabilise as confidence returns.

  "Equities in developed markets and cyclicals may outperform safer assets, while government bonds may see modest yield compression as risk sentiment improves," HSBC said. 

Currencies in this scenario would likely see moderate strengthening in risk-linked currencies (such as Australia or New Zealand Dollar) and a reduction in safe-haven demand for the US dollar.

  "Investors may reduce allocations to safe havens like gold and the Swiss franc if geopolitical pressures ease. Our longer-term Brent forecast for this baseline outcome remains around $65–67 per barrel barring severe supply disruptions," it said. 

Scenario 2: Prolonged conflict with supply disruptions

Under a scenario where the conflict continue for months, with the disruptions to shipping through the Strait of Hormuz materially affects oil flows, then oil prices are expected to rise further. Brent crude, HSBC said, could climb above $80–90 per barrel and stay elevated in this scenario, driving higher inflation expectations globally.

  In this case, stock markets would likely remain under pressure, particularly in energy‐importing regions such as Europe and Asia, while energy producers and commodities-linked equities outperform.

  Defensive sectors such as utilities and consumer staples might attract more inflows.

  Government bond yields could flatten or rise on inflation concerns, even as investors seek safety, creating a complex yield environment. The US dollar and other safe havens like gold and Japanese yen would strengthen as risk-off sentiment persists, the brokerage said.

 

Scenario 3: Major escalation

The third and most severe scenario pencils in a wider regional conflict, potentially involving neighbouring states or leading to a sustained closure of the Strait of Hormuz. 

Under this outcome, HSBC expects oil prices to surge beyond $100 per barrel as global supply becomes constrained. Higher oil and gas prices would fuel inflationary pressures across advanced and emerging economies.

  "Equity markets would likely experience significant volatility and risk-off selloffs, especially in cyclicals and emerging markets. Government bonds might rally initially as investors seek refuge, but yields could rise later due to inflation expectations and central bank policy responses," it said. 

Safe-haven currencies including the US dollar, Swiss franc and Japanese yen would benefit from flight-to-quality flows. 

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