U.S.-Iran Conflict Disrupts Oil Flow, Core Issues Emerge in Stock Markets: Will the Energy Shock End the Risk Asset Rally?

The market is focusing on the disruption of oil flows caused by the US-Iran conflict, not just because of the renewed rise in oil prices. The real issue affecting the pricing of stocks, bonds, and crypto assets is whether this energy supply shock will reignite inflation, forcing the Federal Reserve to maintain high interest rates or even consider further tightening.

In July 2026, as US-Iran military conflict escalated again, vessel traffic through the Strait of Hormuz dropped significantly, while the Red Sea route also faced threats of an expanded blockade by the Houthi group. Brent crude oil rose above $93 per barrel on July 22, nearing a six-week high. For the stock market, the core question has shifted from how long the conflict will last to whether corporate earnings and valuations can withstand the combined pressure of higher energy costs, higher bond yields, and weaker consumer demand.

If the oil flow disruption is a short-term event, stock markets may continue to rely on tech company earnings and AI investment for resilience. If the disruption lasts for weeks or longer, investors will have to reassess the combination of inflation, interest rates, and global growth, potentially altering the pricing basis for risk assets.

Key Points

The US-Iran conflict has significantly reduced oil and gas transport capacity through the Strait of Hormuz, with some tankers suspending transit or changing routes.

Brent crude oil rose to $93.85 per barrel on July 22, 2026, while West Texas Intermediate (WTI) rose to $87.27.

Before the conflict, the Strait of Hormuz carried about one-fifth of the world's oil supply, making it one of the most critical transport nodes in the global energy market.

The core issue for the stock market is not a single day's oil price increase, but whether the energy shock will reignite inflation and bond yields.

Pressure is likely to increase on airlines, transportation, chemicals, consumer discretionary, and high-valuation tech stocks. Energy, defense, and some commodity companies may benefit relatively.

Bitcoin may be impacted in the short term by a sell-off in risk assets and cannot simply be considered a stable safe-haven asset during wartime.

Investors should next focus on actual oil flows, tanker insurance, US inflation expectations, US Treasury yields, and corporate earnings guidance.

The Strait of Hormuz Oil Flow Disruption is Moving from a Risk Scenario to Reality

The market impact of the US-Iran conflict is no longer limited to military action itself. As the US reinstates a naval blockade on Iran-related shipping and Iran continues attacks on targets in the Gulf, commercial vessel traffic through the Strait of Hormuz has noticeably declined.

According to Reuters' tracking of Strait of Hormuz shipping, only three commodity transport ships passed through the strait on July 16, the lowest single-day level since May. No Very Large Crude Carriers (VLCCs) or LNG tankers completed the transit that day, with some tankers anchoring or turning back near the Gulf of Oman.

This means the market is no longer just worried about whether Iran will formally announce a closure of the strait, but whether ship owners, insurers, and energy traders are already voluntarily reducing transits due to security risks.

Reduced Vessel Numbers Alone Can Create a Supply Shock

The strait doesn't need to be completely blocked for global oil flows to be significantly affected. As long as ship owners perceive increased risks of attacks, seizures, or military miscalculations, tankers may delay departures, change routes, or demand higher transport fees.

Insurers may also raise war risk premiums, shorten coverage periods, or refuse to insure some high-risk voyages. The end result is that even if oil fields continue producing, crude may not reach refineries on time.

The supply shock might first manifest in transport delays, spot premiums, and refinery feedstock composition, only later reflecting in official export data.

The Red Sea Route Faces a Second Layer of Pressure

The risks are not limited to the Strait of Hormuz. Yemen's Houthi group has threatened a maritime blockade against ships linked to Saudi Arabia and could disrupt shipping near the Bab el-Mandeb Strait.

An Associated Press report on Houthi shipping threats notes that the Bab el-Mandeb Strait carries about 12% of global trade. Even if the Houthis cannot fully blockade the waterway, sporadic drone, missile, or mine attacks could force ships to reroute around the southern tip of Africa.

If both the Strait of Hormuz and the Bab el-Mandeb Strait are constrained simultaneously, Middle Eastern energy exports will face transport pressure from both directions. The global market would then need to consider not just a single strait being temporarily blocked, but a correlated disruption of the entire Middle Eastern energy logistics network.

Oil Price Rise is Changing the Macro Assumptions for the Stock Market

According to a Reuters energy market report from July 22, Brent crude rose 3.12% to $93.85 per barrel, and WTI rose 3.47% to $87.27, both hitting their highest levels since June 11.

An oil price rise itself does not necessarily lead to a bear market for stocks. What truly determines the market direction is the duration of high oil prices, the scale of the supply disruption, and whether companies and consumers can absorb the new costs.

The Market Previously Relied on the Logic of Cooling Inflation

One of the key supports for the stock market was the gradual decline in US inflation, allowing the Fed to stop raising rates and retain room for rate cuts if the economy slowed.

An energy supply shock could disrupt this logic. Higher crude oil prices first affect gasoline, diesel, and jet fuel, then transmit through logistics, plastics, chemicals, agriculture, and manufacturing costs to a broader range of goods and services prices.

If investors begin to believe the energy inflation is persistent, the bond market may raise long-term inflation compensation, and US Treasury yields could follow suit. High-valuation stocks would face pressure not only from downward earnings revisions but also from valuation multiple contraction.

High Oil Prices Could Create an Environment of Stagnation and Inflation

The worst combination for the stock market is not oil prices rising alone, but rising oil prices simultaneously weakening consumption and corporate profits.

Households need to allocate more income to fuel, electricity, and transportation, potentially reducing spending on other discretionary items. Companies must choose between raising prices, compressing profit margins, and cutting costs.

This environment could create mild stagflationary pressure. Economic growth slows, but inflation cannot fall quickly, making it difficult for the Fed to provide support through rate cuts. This combination is particularly unfavorable for stocks that already reflect high growth expectations.

The Core Question for the Stock Market is Whether Earnings Can Offset Valuation Pressure

The real test of the US-Iran conflict for the stock market is whether corporate earnings growth can continue to outpace the rise in financing and input costs.

Previously, some major stock indices could withstand geopolitical shocks because large tech companies had strong earnings, AI capital expenditure continued to grow, and banking sector performance remained resilient. However, if oil prices stay above $90 per barrel, the market needs to reassess whether these positives can continue to offset macroeconomic pressure.

Tech Stocks Cannot Escape the Interest Rate Environment Either

Large tech companies are not typically seen as direct victims of crude oil costs, but their valuations are highly sensitive to long-term interest rates.

If energy prices push up inflation expectations, the market may reduce bets on rate cuts, and 10-year US Treasury yields could rise. A higher discount rate for future cash flows directly lowers the theoretical value of high-valuation tech companies.

AI infrastructure also requires vast amounts of data centers, electricity, copper, natural gas, and cooling equipment. Rising energy costs not only affect valuations but also increase the actual cost of AI capital expenditure.

Therefore, whether tech stocks can continue to lead the market will depend on whether earnings growth is sufficient to cover higher discount rates and infrastructure costs.

Cyclical Sectors Face a Profit Margin Test

Airlines, shipping, logistics, automotive, chemical, and industrial companies are sensitive to fuel and raw material prices.

Some companies can pass on costs through fuel surcharges or price adjustments, but there is usually a time lag in transmission. In highly competitive industries or those with weak demand, passing all costs onto customers may be difficult.

Retail and consumer service companies could also be indirectly affected. When household energy and transportation expenses rise, spending on dining, travel, entertainment, and non-essential items may be squeezed.

The Rise of Energy Stocks is Not Without Limits

Higher oil prices usually benefit upstream oil producers and some oilfield service companies. Improved cash flow can support dividends, share buybacks, and capital expenditure.

However, if higher oil prices ultimately lead to a global economic slowdown, expectations for energy demand will also decline. Refiners, petrochemical companies, and firms heavily reliant on specific routes could even face pressure from feedstock and logistics mismatches.

The energy sector may therefore be a relative winner in the short term, but it does not mean all energy-related stocks will benefit simultaneously.

Different Markets and Sectors Will Experience Significant Divergence

An energy shock does not affect all countries and assets equally. Crude oil import dependence, currency stability, fiscal subsidy capacity, and industrial structure will determine the actual impact on different markets.

Asian Crude Oil Importers Face More Direct Pressure

India, Japan, South Korea, and some Southeast Asian economies are highly dependent on imported energy. Rising oil prices can widen trade deficits, increase pressure for currency depreciation, and push up domestic inflation.

A Reuters report on global markets on July 13 showed that after the renewed escalation of the US-Iran conflict, oil prices rose nearly 9% in a single day, putting pressure on global stock markets and pushing bond yields higher. The market reaction indicated that energy-importing countries face not only rising corporate costs but also potential capital outflows and currency pressure.

The Indian market is particularly sensitive to oil price changes because energy import costs directly impact inflation, fiscal spending, and the current account. For governments that need to stabilize fuel prices through subsidies, sustained high oil prices could also increase the fiscal burden.

The US Market Has Some Intra-Sector Hedging

The US is both a major oil consumer and a significant global oil and gas producer. High oil prices compress consumer purchasing power but can also boost the revenues of shale oil producers and energy service companies.

This provides the US stock market with some intra-sector hedging capability. However, since the weight of major indices is heavily concentrated in tech and consumer companies, a rise in the energy sector may not be sufficient to offset the decline in large-cap growth stock valuations.

Europe Faces Dual Constraints of Energy Security and Growth

After the previous natural gas crisis, Europe has adjusted its energy structure to some extent, but remains sensitive to imported energy and global shipping.

The simultaneous rise in oil prices, natural gas prices, and transport insurance could once again increase industrial costs in Europe. Auto, chemical, aviation, and manufacturing sectors may face higher pressure than their US counterparts.

If the European Central Bank needs to balance weak growth against a rebound in inflation, the risk premium for European stocks could rise further.

Which Leading Indicators Should Investors Track

Military news can trigger short-term price volatility, but what determines medium-term market direction remains quantifiable oil flows, costs, and financial conditions.

Actual Vessel Transit Numbers

The market first needs to observe the daily number of crude oil tankers, LNG carriers, and product tankers passing through the Strait of Hormuz.

If vessel transits recover within days, the risk premium in oil prices could decline rapidly. If transit numbers remain persistently low, even without a formal blockade, the supply disruption may gradually be reflected in refinery inventories and the spot market.

Tanker Freight Rates and War Risk Premiums

Freight and insurance costs may reflect supply chain pressure earlier than benchmark oil prices.

If tanker freight rates from the Middle East to Asia or Europe continue to rise, it indicates that physical traders are still paying extra costs for transport risk. Even if Brent crude falls back in the short term, terminal energy costs may not decline simultaneously.

Crude Oil Term Structure

The degree to which spot prices exceed forward prices can reflect the market's assessment of near-term supply tightness.

If the premium on near-month contracts widens, it suggests that refiners and traders are willing to pay a higher premium for immediate delivery. Conversely, if forward prices rise but the spot structure does not tighten significantly, some of the increase may be more attributable to risk premium and financial trading.

US Treasury Yields and Inflation Expectations

The most critical transmission channel for the stock market remains the bond market. Investors should focus on 2-year and 10-year US Treasury yields, the implied expectations from Treasury Inflation-Protected Securities (TIPS), and the market's repricing of the Fed's policy path.

If oil prices rise but long-term inflation expectations remain stable, the stock market may digest the shock. If yields and inflation expectations rise simultaneously, the pressure on high-valuation assets will increase significantly.

Investors can track the real-time price changes of Bitcoin and major crypto assets via MEXC, and combine this with crude oil, the US dollar, and stock markets to gauge changes in cross-asset risk appetite.

Can the Crypto Market Be a Safe Haven During an Energy Shock?

The US-Iran conflict and oil flow disruption will also affect Bitcoin and other digital assets, but the transmission path is not singular.

Bitcoin has a fixed supply cap, so some investors may see it as a hedge against currency debasement and long-term inflation. However, during sudden geopolitical shocks, Bitcoin is typically still affected by liquidity contraction and a sell-off in risk assets.

Bitcoin is Closer to a High-Liquidity Risk Asset in the Short Term

When rising oil prices push up the dollar, US Treasury yields, and market volatility, leveraged investors may need to reduce risk exposure. Bitcoin trades 24/7 and has relatively high liquidity, often making it one of the assets investors liquidate to quickly raise cash.

Therefore, in the initial stages of conflict escalation, Bitcoin may fall in tandem with tech stocks, rather than immediately behaving like a gold-like safe haven.

Only when the market begins to interpret the conflict as a risk of long-term fiscal expansion, currency devaluation, or capital controls might Bitcoin's scarcity narrative regain support.

Demand for Stablecoins May Receive Structural Support

Energy trade, cross-border settlements, and increased local currency volatility could boost demand for dollar-pegged stablecoins in certain markets.

Stablecoins cannot eliminate risks associated with issuers, reserve assets, or regulation, but their 24/7 transfer capability can provide a supplementary channel when traditional banking settlement is constrained. Geopolitical conflict might therefore simultaneously put pressure on crypto asset prices and increase demand for stablecoin infrastructure usage.

Altcoins Face Higher Liquidity Risk

If an energy shock leads to tighter global financial conditions, capital typically first exits assets with lower liquidity and valuations dependent on forward narratives.

Bitcoin and Ethereum may receive relatively concentrated capital flows, but small-to-mid-cap tokens, leveraged protocols, and high-yield strategies face greater liquidation pressure. Investors cannot simply infer that the entire crypto market will benefit from geopolitical risk just because Bitcoin has potential inflation-hedging properties.

Exclusive Views from the MEXC Crypto Pulse Research Team

The truly important aspect of the US-Iran conflict disrupting oil flows is not whether Brent crude breaks $90 on a given trading day, but that the market's previously relied-upon logic of low inflation and a soft landing is being tested by reality.

In the recent past, the stock market could tolerate war, tariffs, and fiscal risks because investors believed inflation would eventually fall, corporate earnings could grow, and the Fed had room to cut rates. If energy transport is blocked for a long time, these three assumptions could be challenged simultaneously. Corporate costs rise, consumer demand weakens, and central bank policy space shrinks.

The market might misread the situation by simply viewing rising oil prices as good for energy stocks or bad for airline stocks. The real transmission core lies in the bond market. If energy prices do not push up long-term inflation expectations, the impact of the US-Iran conflict on stock valuations might be limited. If oil prices, inflation expectations, and US Treasury yields all rise together, even if current corporate earnings are still solid, valuations could adjust preemptively.

What investors should focus on next is not the number of military actions, but the actual transport volume through the Strait of Hormuz, tanker insurance costs, the Brent crude term structure, and US inflation expectations. These indicators help determine whether the conflict has shifted from a news shock to a sustained economic shock.

For the crypto market, the biggest takeaway is that Bitcoin's macro asset attribute is strengthening, but this attribute does not equate to being a stable safe