How the US-Iran conflict drives up global consumer goods prices step by step through the value chain

(Author Sun Huaping, Deputy Dean of the Beijing Research Institute of Shandong University of Finance and Economics)

Due to the impact of global geopolitical turmoil, shipping routes through the Strait of Hormuz have been severely disrupted. This “energy bottleneck,” responsible for about 30% of global maritime oil trade, has come to a halt. International oil prices surged accordingly, and global capital markets instantly shifted into risk-averse mode. With navigation through the Strait of Hormuz blocked, most ships are anchored on both sides of the Gulf, leading to a significant increase in crude oil inventories within the Middle Eastern Gulf. This sudden geopolitical conflict will profoundly affect global and Chinese capital markets across multiple dimensions.

1. Oil and Natural Gas: Risks of Disrupted Energy Supply Chains

The Strait of Hormuz is the most critical choke point for global energy supply. It is estimated that about one-fifth of maritime oil, approximately 30% of maritime oil trade, and 20% of liquefied natural gas transportation pass through here. Iran’s announcement to blockade the strait signals a risk of disruption to the global energy supply chain. Since the conflict erupted, oil prices have continued to rise. On March 11, WTI crude oil reached approximately $85 per barrel during trading. After sharp increases, whether due to profit-taking by bulls or easing news, prices may pull back, but the upward trend in crude oil prices is unlikely to have ended. It is important to note that current oil price increases mainly reflect transportation issues, including volume and costs, and have not yet factored in output disruptions. Future focus should be on the duration and escalation of Middle Eastern conflicts, the actual recovery of navigation through the Strait, and whether Iran’s refining facilities will be damaged or control over the strait will shift.

For the natural gas market, prices are even more sensitive. European TTF prices surged, and U.S. natural gas prices also rose sharply. This conflict further highlights the fragility of the energy supply chain and will accelerate strategic adjustments in energy security by major economies. For China, the urgency of diversifying energy imports has increased—re-evaluating the strategic value of China-Russia pipelines, Central Asia pipelines, and China-Myanmar pipelines. The diversification of maritime energy transportation routes will accelerate. Additionally, the release mechanisms and usage pace of strategic oil reserves will become market focal points, as any reserve adjustments could trigger short-term volatile oil price swings.

2. Gold and Precious Metals: The “Triple Logic” of Safe-Haven Demand

Historically, during geopolitical conflicts, gold has always been the first safe-haven asset capital flows into. According to IMF statistics, a 10% increase in geopolitical risk correlates with a 3% rise in gold allocation demand. The current decline in gold prices is essentially due to the suppression of safe-haven demand by the US dollar and yields, rather than fundamental deterioration.

The oil price and inflation pressures caused by Middle Eastern conflicts act as a double-edged sword: short-term negative for gold, but long-term support for a solid bottom. When fiscal deficits, war risks, and inflation expectations converge, gold’s role as a store of value will re-emerge. Silver’s “dual attributes” give it greater elasticity. After gold prices rise, capital begins shifting to silver—an industrial and precious metal—supported by safe-haven inflows and industrial demand, making its volatility even greater than gold.

3. The Strait of Hormuz: A “Blockage Point” in Global Trade and Its Impact on the Global Value Chain

The blockage of the Strait of Hormuz affects far more than energy prices. With the strait effectively facing closure, local container ship traffic has nearly ceased. This is due to escalating regional geopolitical tensions, which pose a challenge to transportation markets. Unlike typical foreign trade with longer order, production, and shipping cycles, short-term impacts on cross-border e-commerce—more time-sensitive—are more pronounced. Even before the Middle Eastern port incidents, Amazon had already initiated emergency measures, announcing on March 1st the suspension of all operations and deliveries in the UAE.

The most far-reaching yet easily overlooked dimension of this conflict is the cost impact on the downstream of the global value chain. Rising energy prices will propagate through the entire chain, ultimately increasing the prices of end consumer goods.

First, the chemical industry chain: Iran is a major exporter of petrochemical products. Its methanol, urea, polyethylene, polypropylene, and other products hold significant global market shares. If the conflict persists or Iranian industrial facilities are attacked, supply of these basic chemicals will shrink sharply, pushing up global chemical product prices. Since chemical products are upstream of nearly all manufacturing—ranging from textiles, packaging materials, to auto parts and electronic casings—cost increases will have widespread effects.

Second, transportation and logistics costs: Fuel costs account for 30%-50% of shipping companies’ operating expenses. Rising oil prices directly increase shipping rates, which in turn raise the landed costs of imported goods. For China, deeply integrated into the global value chain, this means higher raw material import costs and increased export costs for finished products, creating dual pressure.

Third, the lag and accumulation in cost transmission: It takes 2-4 weeks for crude oil price increases to pass through to chemical prices, 4-8 weeks to downstream finished goods, and 8-12 weeks to retail prices. Even if the conflict subsides in the short term, its inflationary impact will continue to manifest over the coming months. If the conflict prolongs, costs will accumulate step by step, forming a “cost-push” inflation transmission chain.

Additionally, the Middle East is not only a major oil producer but also a key source of certain critical minerals. Iran’s abundant copper, zinc, and iron ore resources could see supply disruptions if conflicts affect mining or transportation routes, further tightening global non-ferrous metal supplies and pushing up related commodity prices.

4. Inflation Risks: Transmission from Energy to the Entire Industry Chain and the “Localized Inflation” Feature

If the US-Iran conflict persists and drives oil prices higher, it will directly influence the monetary policies of major economies and trigger broader inflationary pressures through the industry chain. This will further raise gasoline prices, exerting significant pressure on consumers. For the Federal Reserve, rising oil prices will reduce the likelihood of rate cuts this year. If oil prices reach and sustain around $120 per barrel, the U.S. economy could face substantial shocks. European economies, especially, will be severely affected by soaring oil and liquefied natural gas costs. However, the structural feature of “localized inflation” warrants attention. This inflationary shock will not be a broad-based price increase across all goods but will show prominent rises in specific categories, segments, and regions.

First, sector differentiation: Prices of energy-related chemicals, transportation services, and fuels will rise most sharply; second, intermediate goods like plastics, fertilizers, and pesticides will be affected to a lesser extent; and sectors with lower energy dependence, such as electronics and apparel, will be relatively less impacted. This differentiation will significantly widen cost pressures across industries.

Second, segment differentiation: In the global value chain, upstream raw materials benefit from rising prices, midstream processing faces cost pressures, and downstream consumer sectors face demand uncertainties. Profitability will vary markedly across these segments.

Third, regional differentiation: Economies heavily dependent on energy imports (e.g., EU, Japan, India) will face greater imported inflation; energy self-sufficient economies (e.g., the U.S., Canada) will be less affected; energy-exporting countries (e.g., Saudi Arabia, Russia) will benefit from higher oil prices. This regional divergence will influence global capital flows and exchange rates.

From the supply chain perspective, rising crude oil prices have already increased energy and chemical prices, impacting industries. Upstream exploration benefits structurally; midstream transportation and trading sectors benefit from higher freight rates and inventory demand; downstream refineries are reducing capacity, with potential future supply tightening. Rising natural gas prices will also increase fertilizer costs, which will eventually pass through to food prices—the final link in the inflation chain.

5. Stock Markets: Sector Differentiation and Rebuilding of Safe-Haven Logic

The US-Iran conflict’s impact on stock markets is not simply summarized as “safe-haven.” Different sectors, styles, and regions will show clear divergence. After the conflict erupted, major global indices, including the US stock market, declined broadly, especially in Asia-Pacific and Europe, with risk aversion dominating short-term trading.

From an industry perspective, the energy sector is the immediate beneficiary. Both international oil and gas giants and domestic “Big Three” oil companies will profit from rising oil prices.

The shipping sector shows mixed performance. Oil shipping companies benefit from higher freight rates—COSCO Shipping Energy and China Merchants Energy Shipping stocks rose; container shipping firms face risks of cargo delays and demand drops, pressuring their stock prices. Manufacturing sectors generally face pressure, with automotive, machinery, and electronics industries experiencing dual pressures from rising raw material costs and uncertain export demand.

Industries highly dependent on energy and chemicals will see increasing cost pressures. Consumer sectors are temporarily under pressure but may have structural opportunities. Rising oil prices increase travel costs, impacting automotive and tourism industries; however, if inflation expectations rise, essential consumer goods with anti-inflation properties may attract attention. Airlines and transportation sectors are directly affected by rising fuel costs—fuel accounts for over 30% of airline operating costs, and higher oil prices will significantly compress profit margins.

6. Geopolitical Risks: Revaluation of Strategic Assets and the Formation of “Safe-Haven Premium”

The US-Iran conflict’s impact on capital markets extends beyond short-term price fluctuations. Its deeper influence lies in prompting global capital to reassess risk-return profiles across markets and creating structural investment opportunities in A-shares. The essence of the conflict is a severe shock in the process of international order restructuring. When major power rivalries spill over from economic to military domains, and negotiations are replaced by battlefield realities, global capital will inevitably reevaluate risk and return in different markets.

In this context, China, advocating peaceful dialogue, adhering to non-interference principles, and backed by a strong national defense, offers a rare “stability island” for international capital. The low correlation between RMB assets and USD assets provides an irreplaceable diversification benefit in global asset allocation. As the conflict persists, this “safe-haven” attribute may attract more long-term capital seeking refuge, leading to a systemic reassessment of RMB assets.

Unlike past episodes, this conflict occurs amid an accelerating restructuring of the international order, involving multiple countries such as the US, Israel, and Iran, with low prospects for immediate resolution. This suggests geopolitical risks may become long-term and normalized, requiring markets to continuously digest these variables. Such expectations will influence asset pricing—risk premiums will rise, suppressing valuation levels, while scarcity premiums on strategic resources will increase. Geopolitical conflicts will further accelerate the reshaping of global value chains, prompting companies to prioritize supply chain resilience and security over merely minimizing costs, with profound implications for global trade and industrial division.

7. Conclusions and Outlook

A future conflict between the US and Iran around 2026 could become a deeply impactful “major event” for China’s capital markets. It clarifies that when external uncertainties become normalized, the true resilience of assets depends on the stability of the underlying country.

In the short term, markets will enter a typical risk-averse mode. The US dollar will be supported by risk aversion and rising energy prices, and the Swiss franc may strengthen accordingly. Emerging market currencies, especially those heavily reliant on oil imports, will appear more vulnerable. Equity markets will face short-term setbacks, while commodities like gold and oil will continue to benefit from risk premiums. The bond market will undergo re-pricing of inflation and monetary policy expectations, increasing volatility.

In the medium term, three key variables should be monitored: the duration and escalation of Middle Eastern conflicts; the actual recovery of navigation through the Strait of Hormuz; and the impact of high oil prices on macroeconomics and liquidity.

Long-term, geopolitical risks will drive strategic asset revaluation. As global order uncertainties deepen, resource commodities, gold, and military-industrial assets will see valuation adjustments. The normalization of energy supply chain vulnerabilities, accelerated restructuring of Middle Eastern security architecture, and the US strategic focus returning to the Middle East—potentially easing pressures on Asia-Pacific—are notable trends. China’s strategic reserves of key minerals and overseas resource deployment give A-shares a “security premium” beyond typical cycles. Meanwhile, the structural feature of “localized inflation” will cause continued divergence across industries, segments, and regions, demanding higher adaptability from countries.

(Contributing co-author: Wang Kui, Certified Public Accountant at Zhenjiang Hainachuan Logistics Industry Development Co., Ltd.)

(Article from First Financial)