Weekly Winzer: Is the situation between the USA and Iran escalating?

In recent weeks, an unusually large US military presence has built up around Iran. Two American aircraft carriers are now stationed in the region, supported by US boats, tanker planes and other equipment. The media also report the deployment of heavy transport aircraft, reconnaissance platforms and tanker aircraft to US bases in the region.

In addition, US President Donald Trump recently escalated the tone: if no agreement is reached on the Iranian nuclear program within 15 days, “bad things will happen”.

A new phase of the crisis

The tensions between the US and Iran have thus entered a new, potentially more dangerous phase. At the same time, many experts seem to agree: Neither Washington nor Tehran are interested in an all-out war. Nevertheless, the risk of escalation has increased. The financial markets are currently pricing in a high probability of a negotiated solution between the two parties to the conflict.

The increased uncertainty can nevertheless be seen above all in the rise in the price of oil – from around USD 60 per barrel of Brent at the start of the year to around USD 71.3 recently (as at 23.2.2026). In geopolitical crises, oil is often seen as an early warning signal of growing uncertainty.

Three factors are driving the situation in the Middle East

Three forces are central to the fragile situation in the Middle East:

• The unrest in Iran
  Iran has been in a serious economic crisis for some time. High inflation, unemployment and falling purchasing power have led to nationwide mass protests since December 2025. These were violently suppressed by the regime. According to reports in Time Magazine, up to 30,000 people died in the process, citing local health authorities.
  
  This unrest has considerably weakened the regime and increased the pressure on the political leadership.

• Growing pressure from the US
  The attacks by the US and Israel last year have already weakened Iran’s deterrent and its network of regional allies. The current massive increase in troop and naval presence is reinforcing this development.
  
  The aim of the USA is to protect its own interests and allies in the region – including military bases, oil facilities and the strategically important Strait of Hormuz. At the same time, the military threat is intended to force Iran into negotiations.
  
  However, Iran continues to reject key US demands, such as restrictions on missile programs, uranium enrichment and regional activities.

• Nuclear insecurity
  An enrichment level of around 90% uranium is required to build nuclear weapons. Iran had already increased its production to 60 percent in the previous year. The International Atomic Energy Agency (IAEA) has largely lost control of this stockpile.
  
  Last year, the IAEA described the cooperation with Tehran in reviewing Iran’s nuclear program as “unsatisfactory”. The risk of Iran using the enriched uranium to build nuclear weapons has increased. Experts refer to this as the proliferation risk. There are also warnings that chaos in Iran could lead to the loss or theft of nuclear material.

What scenarios are conceivable?

Theoretically, three possible scenarios emerge:

1. Negotiated solution. The talks in Oman find a solution acceptable to both sides. The US deterrent was sufficiently credible.
2. Because Iran is refusing to make key concessions, the USA is launching targeted, short attacks. The limited US military strikes mean a moderate and temporary escalation. In this case, the risk lies in Iran’s response (e.g. a possible “closure” of the Strait of Hormuz).
3. Greater escalation. In the event of escalation, the USA would probably respond with major counter-strikes.

In all three scenarios, there is also the risk of a nuclear crisis in the medium term. In the event of a loss of uranium material, a nuclear incident could occur at some point / somewhere.

What do these scenarios mean for the stock markets?

Derived for the financial markets, this constellation implies three possible developments. The impact channels are firstly the degree of uncertainty, secondly the oil price and thirdly the price of liquefied natural gas (LNG).

In the event of a negotiated solution, the oil price is likely to settle at a lower level again. This would reduce inflation slightly (positive for bonds). The resulting small increase in purchasing power would be positive for economic growth (positive for equities). The reduced uncertainty would also be positive for market sentiment.

Around a quarter of global maritime oil transportation takes place through the Strait of Hormuz. The mere risk that the strait could become impassable would lead to a further rise in the price of oil. Inflation and uncertainty on the markets would rise temporarily (negative for bonds and equities). In addition, around a fifth of global LNG transportation also flows through the strait. In the event of a feared bottleneck, Asian and European gas prices would probably be affected.

Safe havens could become more attractive, government bonds from Gulf states would lose out

An actual escalation would make the so-called safe havens appear more attractive. These include: the euro money market, the US dollar, the Swiss franc and gold. Government bonds from developed economies (US government bonds and German government bonds) are unlikely to be safe havens in this environment because inflation will rise, at least temporarily. At the same time, risky assets such as equities would become less attractive.

Government bonds could come under pressure, particularly in the Gulf states, as the increased country risk would be reflected in higher risk premiums. A look at the recent past rather suggests that

In the past, however, geopolitical events have often not had a lasting impact on the financial markets. It is therefore possible that an escalation with a backlash from Iran would only affect the markets for a limited period of time.

Is inflation threatening a comeback?

Nevertheless, the risk of longer-term effects remains – especially in the event of a major military escalation. The impact channels are similar to the previous scenario, only more powerful. Sharp rises in oil and gas prices and a sharp increase in uncertainty could create a stagflationary shock.

Lurking in the background is the risk of a permanent rise in inflation and inflation expectations. This is because inflation has been on the rise since 2021. Another – albeit initially only temporary – rise in inflation could damage the credibility of central banks in the fight against inflation. In this case too, safe havens such as the money market or gold would be in demand.

Conclusion

In his book “On War”, the general and military theorist Carl von Clausewitz describes the fundamental characteristics that characterize every war. One of these pillars is chance, which plays a central role for Clausewitz. In war, hardly anything is clear: incomplete information, misjudgements, deceptions and contradictory situation reports characterize the environment.

This sounds familiar. This uncertainty explains why risk aversion on the markets has increased recently: equities are under pressure and the US dollar is firmer. A balanced, broadly diversified approach therefore remains more important than ever for private investors.

 

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