U.S.-Iran Conflict Disrupts Oil Flow, Core Issues Emerge in the Stock Market; Will Energy Shocks End the Rally in Risk Assets?

The market's focus on the oil flow disruption caused by the US-Iran conflict is not solely due to another rise in crude oil prices. The real issue affecting stock, bond, and crypto asset pricing 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, the military conflict between the US and Iran escalated again, leading to a sharp decline in vessel traffic through the Strait of Hormuz. The Red Sea shipping route also faces the threat of an expanded blockade by the Houthi rebels. Brent crude rose to over $93 per barrel on July 22, nearing six-week highs. 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 only a short-term event, the stock market may continue to rely on strong tech company earnings and AI investment for resilience. However, 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 foundation for risk assets.

Key Takeaways

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

Brent crude 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 handled 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 may increase on airlines, transportation, chemicals, consumer discretionary stocks, and high-valuation tech stocks, while energy, defense, and some commodity companies may benefit relatively.

Bitcoin may be temporarily affected by the sell-off in risk assets and cannot simply be considered a stable safe haven in a wartime environment.

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

The Strait of Hormuz Oil Flow Disruption is Becoming a Reality, Not Just a Risk Scenario

The market impact of the US-Iran conflict is no longer limited to military actions themselves. As the US reinstates a naval blockade on Iran-related shipping and Iran continues to attack targets in the Gulf region, commercial vessel traffic through the Strait of Hormuz has notably decreased.

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

This means the market's concern is no longer just whether Iran will formally close the strait, but whether shipowners, insurers, and energy traders are already proactively reducing traffic due to security risks.

Reduced Vessel Traffic Alone Can Create a Supply Shock

The strait doesn't need to be completely blocked for global oil flows to be significantly impacted. As long as shipowners perceive a higher risk of attacks, seizures, or military miscalculations, tankers may delay departures, change routes, or demand higher freight rates.

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

The supply shock might therefore first manifest in transport timeliness, spot premiums, and refinery feedstock composition, before being reflected in official export data.

The Red Sea Route Faces a Second Layer of Pressure

Risks are not limited to the Strait of Hormuz. Yemen's Houthi rebels have threatened a naval blockade against Saudi-related vessels and may disrupt shipping near the Bab el-Mandeb Strait.

A report by the Associated Press on Houthi shipping threats notes that the Bab el-Mandeb Strait handles about 12% of global trade. Even if the Houthis cannot completely blockade the waterway, sporadic drone, missile, or mine attacks could force vessels 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 eastern and western directions. The global market will then have to consider not just a short-term blockage of a single strait, but a correlated disruption across the entire Middle Eastern energy logistics network.

Rising Oil Prices Are Changing the Macro Assumptions for the Stock Market

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

Rising oil prices do not necessarily lead to a bear market for stocks. What truly determines market direction is the duration of high oil prices, the scale of supply disruption, and whether businesses and consumers can absorb the added costs.

The Market Previously Relied on the Logic of Cooling Inflation

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

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

If investors start believing the energy inflation is persistent, the bond market may raise long-term inflation compensation, and US Treasury yields could rise accordingly. High-valuation stocks would face pressure not only from downward earnings revisions but also from valuation multiple compression.

High Oil Prices Could Create an Environment of Simultaneous Growth and Inflation

The worst combination for the stock market is not oil prices rising alone, but rising oil prices that simultaneously weaken 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, or cutting costs.

This environment could create mild stagflationary pressures: 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 costs and input costs.

Previously, major stock indices were able to withstand geopolitical shocks because of robust earnings from big tech companies, continued growth in AI capital expenditure, and resilient bank performance. However, if oil prices remain above $90 per barrel, the market needs to reassess whether these positive factors can continue to offset macro pressures.

Tech Stocks Are Not Immune to Interest Rate Environment

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 the 10-year Treasury yield 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 could also increase the real 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 Industries Face a Test of Profit Margins

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 transmission usually involves a time lag. In highly competitive or weak-demand industries, it may be difficult to pass on all costs to customers.

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

The Rise in Energy Stocks Is Not Without Limits

Rising oil prices typically benefit upstream oil producers and some oilfield service companies. Improved cash flow may support dividends, share buybacks, and capital expenditure.

However, if rising oil prices ultimately trigger a global economic slowdown, expectations for energy demand will also fall. Refiners, petrochemical companies, and firms highly dependent on specific routes could even face pressure from raw material and logistics mismatches.

Therefore, the energy sector may be a relative short-term winner, but it does not mean all energy-related stocks will benefit uniformly.

Significant Divergence Expected Across Different Markets and Industries

The energy shock will not impact all countries and assets equally. Dependence on crude oil imports, 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 could widen trade deficits, increase pressure for currency depreciation, and fuel domestic inflation.

A Reuters report on global markets on July 13 showed that after the re-escalation of the US-Iran conflict, oil prices surged nearly 9% in a single day, putting pressure on global stock markets and pushing bond yields higher. This market reaction indicates that energy-importing countries not only face rising corporate costs but may also simultaneously suffer from capital outflows and exchange rate pressure.

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

The US Market Has Intra-Industry Hedging

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

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

Europe Faces Dual Constraints of Energy Security and Growth

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

Simultaneous increases in oil prices, natural gas prices, and transport insurance could again raise industrial costs in Europe. Automakers, chemical companies, airlines, and manufacturers may face more pressure than their US counterparts.

If the European Central Bank must weigh weak growth against a rebound in inflation, the risk premium on European stocks could rise further.

Which Leading Indicators Should Investors Track?

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

Actual Vessel Traffic

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 traffic resumes within days, the risk premium in oil prices could quickly decline. If traffic remains persistently low, the supply disruption may gradually reflect in refinery inventories and spot markets, even without a formal blockade.

Tanker Freight Rates and War Risk Premiums

Freight and insurance costs may reflect supply chain pressures 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 in the short term, end-user energy costs may not decline synchronously.

Crude Oil Term Structure

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

If the backwardation in near-month contracts widens, it suggests that refiners and traders are willing to pay a premium for immediate delivery. Conversely, if forward prices rise but the spot structure doesn't tighten significantly, some of the increase may be more attributable to risk premiums 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 the 2-year and 10-year Treasury yields, breakeven inflation rates implied by 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 absorb the shock. If yields and inflation expectations rise simultaneously, the pressure on high-valuation assets will increase significantly.

Investors can monitor real-time price changes for Bitcoin and major crypto assets on MEXC, while using 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 the Energy Shock?

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

Bitcoin has a fixed supply cap, leading some investors to view it as a hedge against currency debasement and long-term inflation. However, during sudden geopolitical shocks, Bitcoin typically still suffers from liquidity contraction and risk asset sell-offs.

Bitcoin Acts More Like a High-Liquidity Risk Asset in the Short Term

When rising oil prices push up the US dollar, Treasury yields, and market volatility, leveraged investors may need to reduce risk exposure. Bitcoin, being tradable 24/7 and highly liquid, often becomes one of the assets investors sell to quickly raise cash.

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

Only when the market begins to interpret the conflict as a risk of prolonged fiscal expansion, currency devaluation, or capital controls could Bitcoin’s scarcity narrative regain support.

Demand for Stablecoins May Receive Structural Support

Increased energy trade, cross-border settlements, and local currency volatility could boost demand for USD-pegged stablecoins in some markets.

Stablecoins do not eliminate risks related to issuers, reserve assets, or regulations, but their 24/7 transferability can provide a supplementary channel when traditional bank settlements are constrained. Geopolitical conflicts could, therefore, simultaneously hit crypto asset prices while increasing the usage demand for stablecoin infrastructure.

Altcoins Face Higher Liquidity Risk

If the energy shock leads to tighter global financial conditions, capital typically withdraws first from assets with lower liquidity and valuations reliant on forward narratives.

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

Exclusive Views from the MEXC Crypto Pulse Research Team

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

Recently, the stock market could tolerate war, tariffs, and fiscal risks because investors believed inflation would eventually fall, corporate earnings could grow, and the Fed would retain room for rate cuts. If energy transport is hindered for a prolonged period, these three assumptions could all be challenged simultaneously: corporate costs rising, consumer demand weakening, and central bank policy space shrinking.

The market may misinterpret this by simply viewing rising oil prices as a positive for energy stocks or a negative for airline stocks. The real core of transmission 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 may be limited. If oil prices, inflation expectations, and Treasury yields rise together, valuations may adjust preemptively, even if current corporate earnings remain solid.

Going forward, investors should focus less on the number of military actions and more on 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 transformed from a news shock into a sustained economic shock.

For the crypto market, the biggest takeaway is that