Investors must prepare for rising interest rates due to the escalating conflict in Iran, warns the CEO of one of the world’s largest independent financial advisory organisations.
Nigel Green, CEO of deVere Group, issued this warning as oil markets experience significant volatility following threats to shipping through the Strait of Hormuz.
This critical passage carries approximately 20% of the world’s crude oil supply.
Reports indicate that an Iranian Revolutionary Guard commander has claimed the Strait of Hormuz is closed and has threatened to target any vessel attempting to pass through.
As a result, Brent crude prices have surged above $87 a barrel, increasing more than 9% in a single session. West Texas Intermediate has climbed past $83, rising over 8%, marking one of the sharpest short-term spikes in over a year.
Green explains, “When oil prices surge with this magnitude and speed, inflation doesn’t just increase gradually; it accelerates rapidly.”
He continues, “Energy costs are embedded in every supply chain. A sustained increase towards $90 for Brent crude fundamentally alters the inflation outlook, forcing a re-evaluation of interest rate expectations.”
The narrative around lowering borrowing costs is now at risk, according to Green. “A renewed energy shock of this magnitude reduces the likelihood of rate cuts and increases the probability that monetary policy will remain restrictive for longer than investors previously anticipated.”
Green points out that higher oil prices directly impact transportation, logistics, food production, and household energy bills. This pressure quickly reflects in headline inflation and eventually affects core readings through wages and corporate pricing decisions. Central banks are highly aware of this transmission mechanism.
If inflation expectations begin to rise again, monetary authorities will respond decisively.
Therefore, investors should prepare for “rates remaining elevated well into 2026, and potentially rising further if inflation proves to be persistent.”
Regarding fixed-income markets, he notes, “Bond yields are already adjusting to reflect reduced confidence in immediate rate cuts. The risks associated with duration become more pronounced in this environment.”
The U.S. dollar is attracting renewed safe-haven flows. During periods of geopolitical tension combined with inflation risk, “capital tends to gravitate toward dollar-denominated assets.” There is an increasing demand for Treasury bills and high-quality fixed income as investors seek both yield and security.
High oil prices also compress corporate margins. Companies facing higher input costs will either absorb the additional expenses or pass them on to consumers.
“Both scenarios have implications for earnings forecasts and equity valuations,” Green observes.
He emphasises the prolonged risk of the conflict, stating, “Markets cannot assume a rapid resolution. Disruption to such a critical energy corridor introduces structural risks.”
Portfolio positioning should reflect the possibility that elevated oil prices may persist for months rather than just days.
On equities, Green advises, “Investors should reassess their exposure to sectors heavily reliant on energy-intensive supply chains. Key metrics include pricing power, balance sheet strength, and cash flow resilience.”
He suggests that selective allocation to energy producers and real assets can serve as a counterbalance to rising input costs. Historically, commodity-linked investments have performed well during inflationary supply shocks.
Addressing complacency directly, Green asserts, “This is not a typical episode of volatility driven solely by sentiment. This is a supply-side shock with real macroeconomic consequences. As inflation pressure mounts, the flexibility of monetary policy will diminish.”
He notes that Europe and parts of Asia remain highly susceptible to imported energy costs. A prolonged rally in oil prices could strain growth while complicating inflation control. “Divergent policy responses could exacerbate currency volatility,” Green adds.
In conclusion, he states, “To safeguard wealth, investors must act decisively. Stress-test portfolios against higher inflation assumptions. Those who review and potentially reposition their investments now will be better equipped to protect and grow their wealth in what could become a prolonged high-rate environment.”
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