US.-Iran war increases potential for risk-off periods in all markets – analyst

Crude oil futures (CL1:COM) jumped more than 2% on Tuesday as escalating military exchanges between the U.S. and Iran, combined with Houthi threats to blockade Saudi Arabian ports, are raising the specter of broader market turmoil, according to Andrew Hecht, investing group leader of Hecht Commodity Report.

"Markets have been following oil and oil product prices since March, and the escalation in hostilities that could be headed for all-out war increases the potential for risk-off periods in markets across all asset classes," Hecht said.

He noted that while oil prices (CL1:COM), (CO1:COM) remain below their March 2026 highs, they have climbed steadily since early July as Middle East hostilities intensified.

The Strait of Hormuz remains a dangerous focal point, and the Houthis—an Iranian satellite group—are blockading Saudi oil flowing through the Bab el-Mandeb passage in the Red Sea.

Hecht recommended investors protect risk positions, adding that "the VIX (VIX) at below 18 seems inexpensive considering the geopolitical landscape."

Joseph Brusuelas, principal and chief economist for RSM US, emphasized the domestic impact of rising energy costs.

With oil (CO1:COM) trading near $91.50 and gasoline (XB1:COM) averaging $4.01 per gallon, household affordability concerns are mounting.

Diesel prices at $5.14 per gallon are particularly worrisome, he said, as declining weekly stocks to multi-decade lows will likely sustain price increases.

"The cost of diesel touches every industry and many consumer products via the transportation channel, which is a transmission mechanism of inflation into the U.S. household," Brusuelas noted.

The logistical stakes are enormous. Saudi Arabia has shipped more than 4.5 million barrels per day from Yanbu since April, with 70% destined for Asia. A Red Sea shutdown would force rerouting around much longer routes, creating significant bottlenecks, according to analysts at Kpler and Energy Aspects.