As tensions continue to escalate in the Middle East, European natural gas prices have risen by over 40%. Goldman Sachs has warned that if shipping through the Strait of Hormuz is disrupted for only a month, natural gas prices could more than double. For reference, in the first two weeks following the Russia-Ukraine conflict, European natural gas prices surged by approximately 180%; subsequently, wholesale electricity prices across the Eurozone also rose sharply, further exacerbating volatility in foreign exchange markets, including the euro-dollar exchange rate, adding further uncertainty to already fragile global financial markets. The Strait of Hormuz, as one of the world's most important energy transport routes, handles approximately one-third of global seaborne oil and nearly one-fifth of liquefied natural gas; its navigational safety directly determines the stability of global energy supply.



If the current tensions continue to escalate and fail to ease, European industry will once again be the first to suffer, and the entire Eurozone economy will inevitably bear enormous pressure. It's worth noting that, according to the latest data released by the European Commission, the Eurozone's overall economic confidence index fell to 98.3 in February from 99.3, lower than the market expectation of 99.8. This data reflects growing concerns among businesses and consumers about the Eurozone's economic outlook. At the same time, industrial business sentiment data further deteriorated, falling from -6.8 to -7.1, remaining in negative territory and far below the market expectation of -6.1, highlighting the squeeze effect of rising energy prices on European manufacturing. Furthermore, inflation expectations have rebounded, rising from 24.2 to a high of 25.8. This persistently high inflationary pressure not only weakens household purchasing power but also poses a greater challenge to the European Central Bank's monetary policy. No wonder European stock markets have been under continuous pressure recently, with investors adopting a wait-and-see attitude and risk aversion clearly rising.

Looking at the crude oil price chart, prices surged by over 8% at the start of the week, coupled with a 3% increase last Friday, demonstrating a strong upward trend in the short term. However, the future outlook is not optimistic: if the Middle East conflict continues to escalate and tanker shipping through the Strait of Hormuz is restricted for several weeks, crude oil prices could easily break through $100 per barrel, and may even reach higher levels. Even if OPEC increases production quotas, it will be difficult to offset the impact of disrupted shipping through the Strait on global physical crude oil supply—after all, the Strait of Hormuz plays an irreplaceable role in the global energy supply chain. More alarmingly, if Iran deliberately attacks oil production and refining infrastructure in the Persian Gulf region (there are already initial signs of such an event), crude oil prices could experience an even more dramatic surge, further pushing up global energy costs.

That said, all parties still have an opportunity to return to the negotiating table and resolve the current crisis as soon as possible. In the United States, with the midterm elections approaching, entering the election cycle amidst an indefinite conflict would pose significant political risks to the ruling party, thus giving the US government an incentive to de-escalate the situation. For Iran, the economic and humanitarian costs of prolonged sanctions and conflict are steadily increasing, domestic economic pressures are mounting, and livelihood issues are becoming increasingly prominent, which also gives Iran a desire to ease tensions. Currently, the market has not fully digested the impact of the worst-case scenario and has not yet fallen into widespread panic; investors are still observing the situation and awaiting clearer signals.

Regarding whether the US president will reintroduce "TACO" (targeted economic or energy support policies) should the market experience a sharp decline, investors seem to remain hopeful, believing that either such policies will be implemented or the situation will be resolved quickly. However, it should be noted that compared to previous regional conflicts, the current Middle East situation presents a significantly greater risk exposure, involves more complex interests of all parties, and has a much higher probability of escalation and potential impact than in the past. Therefore, investors' optimistic expectations should be treated with caution.

The core issue is that even if the conflict in Iran is eventually resolved, the risk of a large-scale conflict in Asia remains, and is even emerging. As the region with the fastest-growing energy demand globally, and also one with a high dependence on energy imports, any geopolitical conflict in Asia will directly impact the global energy production, transportation, and supply landscape, further exacerbating volatility in the global energy market and adding new threats to the already uncertain global energy security.