By Reshma Kapadia

The duration of the Iran war and how long the Strait of Hormuz is closed have been key in assessing how much pain the global economy could take -- and how the market should react.

Israel attacked an Iranian gas field, the largest of its kind, overnight. Iran attacked a major Qatari fuel hub following Iran's threats it would strike energy facilities in the Gulf. These attacks are nudging strategists on Wednesday to rethink their timeline for the conflict, reducing the odds it could be over by April, with the strait reopened and oil prices retreating.

Jitania Kandhari, head of macro and thematic research for the Emerging Markets Equity team at Morgan Stanley Investment Management, has been keeping tabs on attacks on energy infrastructure because it could take time to restore production.

While certain markets in Asia and emerging markets have seen steep selloffs, the S&P 500 is only down about 4% since the conflict began.

In a video to clients, UBS strategist Bhanu Baweja cautioned that markets have become accustomed to U.S. policies being reversed when they rattle market. "They aren't prepared for this conflict to be a long one, " Baweja said, adding that oil could hit $150 a barrel if the conflict doesn't end by April. Prices could climb even more sharply for natural gas and petroleum products, he said.

In a note to clients, Christopher Granville, managing director for global political research at TS Lombard, said he is shifting his base case scenario for how long the shock could last from four to five weeks -- something the market could ride through -- to five months more like the shock from Russia's invasion of Ukraine in 2022. One big problem: The various solutions to reopening the Strait of Hormuz are risky and may fail.

That said, Trump doesn't want high energy prices in an election year, and the Iran regime sees surviving as a victory, Granville says. Earlier in the conflict, Granville expected both sides would de-escalate more quickly and the U.S. and Israeli attacks on Iran would end.

But Trump has said the closure of the Strait of Hormuz is mainly a problem for other countries rather than the U.S. It is possible that Iran would slowly ease its chokehold on the strait if the U.S. walks away. However, Granville says this scenario wouldn't resolve the political backlash for Trump from high gasoline prices and it would mean walking away from finding a solution to that problem.

"There is clearly a chance now that Trump's probes toward his market-friendly goal of early exit either blow up badly or just don't work," Granville writes, noting the risk the latter results in an unknown period of an energy shock. "Either of those outcomes would shift the balance of probability from an ignorable four-to-five week blip towards what we had previously identified as the worst case of a 2022-style energy shock lasting half a year."

Others are also rethinking the timeline for the conflict. The range of outcomes stretches from the more benign with Iran's rulers agreeing to open the strait as part of a negotiated settlement with the U.S. and Israel to the extreme where the U.S. must protect oil tankers for a long period, says Christopher Smart, managing partner at Arbroath Group.

More likely, he says, will be a messy intermediate situation in which traveling through the Gulf becomes safer than in recent weeks but not nearly as safe as it was before the start of the conflict. "This means a much longer boost to energy prices, which raises the odds of recession," Smart says, adding that investors can't ignore the possibility that tensions will cause the strait to close again. "Even if the conflict magically ends tomorrow, the world now understands that the free passage of 20% of its oil consumption now depends on the goodwill of whatever government ends up running Iran. "

If no de-escalation emerges and oil prices head higher, consumer-oriented stocks, including autos, and financials could be among the most vulnerable, according to Baweja.

While U.S. stocks have held up better than those abroad during past energy shocks, high valuations could mean they are more at risk this time. Stocks went into this supply shock trading at an average of 22 times earnings compared with 14.9 in previous supply shocks.

Write to Reshma Kapadia at reshma.kapadia@barrons.com

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March 18, 2026 18:20 ET (22:20 GMT)

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