ALTERNATIVE MARKETS UPDATE – MID MAY 2026

​The Middle East war remains one of the central macro risks for institutional investors, with the Strait of Hormuz acting as the key transmission channel from geopolitical escalation into global inflation, rates and risk assets. While recent reports of potential US-Iran de-escalation have helped oil prices move back below their recent highs, the situation remains fragile, particularly as shipping disruptions, insurance constraints and uncertainty around safe passage through Hormuz continue to weigh on energy markets. The strategic importance of the Strait is difficult to overstate: the World Bank estimates that it handles around 35% of global seaborne crude oil trade, while recent market commentary also highlights its importance for LNG flows. For investors, the key issue is therefore not only whether a formal escalation occurs, but whether tanker traffic, insurance availability and regional energy infrastructure can normalise quickly enough to prevent a persistent supply shock. Against this backdrop, oil has already repriced materially higher in 2026, with WTI and Brent up around 55–58% YTD as shown in Figure 1. WTI now stands at roughly $91 per barrel, while Brent trades around $94 per barrel, underscoring that even after recent de-escalation hopes, the geopolitical risk premium in energy markets remains substantial.

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