HSBC: Iran war denting global confidence, oil-driven inflation risk

HSBC executives, speaking at a global investment summit in Hong Kong, warned that the ongoing war involving Iran is already weighing on corporate and investor confidence. Group CEO Georges Elhedery said the conflict’s duration and uncertainty are particularly worrying and that effects extend beyond energy to goods, fertilisers and metals.

Officials pointed to immediate market signals: Brent crude briefly rose above $100 a barrel before dipping to around $98.5 on Tuesday, while the FTSE 100 recorded modest gains as companies flagged a more uncertain macro backdrop. HSBC chair Brendan Nelson stressed that a durable Middle East peace would be necessary to restore full energy flows, warning that oil-driven inflation can lift prices and depress growth if disruptions persist.

The transmission to industry has been tangible. Manufacturers that rely on petrochemical feedstocks—such as polyester producers—reported input cost increases in the low double digits, and aviation operators cited jet-fuel prices well above pre-conflict levels. Disruptions to shipping routes and reductions in flight capacity are amplifying logistics and input-cost risks, which may translate into higher headline inflation readings in coming months.

From a broader economic perspective, the Middle East remains an important region for several European banks; analysts estimate it accounts for a non-negligible share of pre-tax profits for institutions with regional exposure. Elhedery noted limited large-scale capital flight to date but acknowledged that some high-net-worth clients are considering relocation to other financial hubs. Such shifts could have localized liquidity and asset-allocation implications.

Market strategists say heightened volatility is likely to persist while geopolitical risks remain elevated. Portfolio managers are recommending tactical hedges against commodity-driven inflation, selective commodity exposure and defensive positioning in credit and equity portfolios. Wealth managers and banks are also urging clients to reassess stress scenarios for earnings and credit costs should energy-price pressures continue.