Market Stories by Fathom 20/03/2026

As the conflict enters its twentieth day, the initial hope for a swift resolution has given way to a grim realization that the window for a ceasefire is rapidly closing. Market participants are increasingly forced to grapple with a stagflationary outlook as the escalation scenario moves from a theoretical risk to a tangible reality. Recent data indicates that the probability of a ceasefire by the end of March has plummeted from an initial 44 percent to just 6 percent, while the likelihood for April has been halved to 33 percent. With the odds of US troops entering Iran now estimated at 64 percent, the timeline for the confrontation appears to be extending rather than contracting. This geopolitical tension has manifested sharply in commodity markets, where Brent crude reached an intraday high of $119 before settling near $107. The impact is even more pronounced in secondary energy and agricultural markets, with European natural gas prices via the TTF rising 98 percent and fertilizer costs increasing by a third since the start of hostilities.

The equity markets have responded with a pronounced shift toward de-risking, pushing the S&P 500 to a new low for the year. Analysts suggest that a Brent price range between $100 and $120 typically correlates with a growth slowdown and a market correction of 7 to 10 percent. Given that the S&P 500 and the STOXX 600 have already fallen by 5.3 percent and 7.9 percent respectively, much of this anticipated slowdown appears to be priced in. However, the risk of a more severe impairment remains high. If Brent sustain prices above $120, alongside further disruptions in natural gas and petrochemicals, markets could face a more significant pullback of 15 to 20 percent, reminiscent of the volatility seen during the Liberation Day period. While a sudden de-escalation could allow investors to look through the current economic data, the daily persistence of price pressures makes such a recovery increasingly difficult to envision. A significant danger currently overlooked by markets is the assumption that commodity production can be instantly restored once hostilities cease. The technical reality of extracting and processing raw materials is far more complex than a simple manufacturing restart. Reviving oil and gas production, particularly in offshore fields or liquefied natural gas facilities, can take several months or years after the recent LNG facilities attacks.

Compounding the pressure on global growth is the prospect of central banks tightening monetary policy into a significant commodity shock. Despite the clear risks to economic activity, policymakers appear focused on containing the inflationary fallout. The Reserve Bank of Australia has already moved on rates, while the Federal Reserve has noted that energy costs will inevitably drive headline inflation higher in the near term. The European Central Bank has revised its 2026 inflation forecast upward to 2.6 percent, and the Bank of England warned of inflation hitting 3.5 percent over the coming two quarters. This has led to a divergence in market expectations; while the bond market is pricing in a potential cut from the Fed, it is simultaneously anticipating nearly two hikes each from the ECB and the Bank of England in 2026. While consumer demand has remained surprisingly resilient thus far, the erosion of purchasing power is becoming visible as US and Emerging Asia. The diplomatic background of the crisis has become a subject of intense scrutiny following reports from external participants in the US-Iran talks. Testimony from officials, including the UK’s National Security Advisor Jonathan Powell and Oman’s foreign minister, suggests that a permanent deal to ensure Iran would never develop a nuclear weapon was within reach before the outbreak of violence. These sources indicate that the path to a negotiated solution was open and that Iran had expressed a willingness to accept permanent constraints. This suggests that the current conflict may have been a result of a deliberate move away from diplomacy rather than its failure. Reports indicate that the Israeli government, distrusting Iranian intentions and fearing the security implications of a nuclear-armed Tehran, successfully lobbied elements of the US administration for a more direct intervention. There are further indications that Prime Minister Benjamin Netanyahu has focused on eliminating Iranian leaders most likely to negotiate, effectively blocking pathways for a future ceasefire.

As the conflict lingers, the strategic options available to the US and its allies have narrowed significantly. A withdrawal at this stage is viewed by some strategists as a move that would bolster the legitimacy of the Iranian leadership and demonstrate a failure of the US to defend its regional partners. This leaves the prospect of a ground war as the alternative, a scenario that neither the markets nor the initial architects of the intervention may have fully anticipated. The situation has evolved into a potential framework for mutually assured destruction, where the economic and security costs are being felt globally. For now, the political fallout is already visible in domestic US politics, where the excursion is negatively impacting the odds of the Republican party maintaining control of the Senate, while the broader international community faces an energy crisis that was entirely avoidable.

Loss for the US, loss for the Gulf, loss for the Rest for the World.

Relative winners are Russia and LatAm.

Alexandros Tavlaridis