By Naeem Aslam
Markets can handle rising prices. What crushes confidence is uncertainty that squelches investment.
Prolonged uncertainty from the Iran war feeds inflation.
If the Iran conflict remains prolonged, the economic consequences extend well beyond oil producers or defense contractors.
Oil prices dominate the headlines as the Iran conflict unfolds. Investors watch every move in crude, every military headline and every comment from policymakers, trying to assess whether energy markets are about to experience another major shock.
But the most expensive part of the Iran war may not be the oil prices (CL.1) (BRN00) themselves.
It may be uncertainty. Markets can absorb expensive energy; businesses can adapt to higher fuel costs if those costs remain stable and predictable. What becomes far more damaging is an environment in which prices swing violently, geopolitical risks shift by the hour and corporate decision-makers lose visibility over what comes next.
That is when the war stops being a commodity story and becomes an economic one.
Volatility is more dangerous than high prices
The issue is not simply cost. It is confidence.
Oil stabilizing around $100 a barrel is painful but manageable: Airlines can hedge, manufacturers can plan, logistics firms can adjust contracts and investors can model earnings.
But a market that swings rapidly between $95 and $130 creates a different problem entirely. That kind of volatility freezes decision-making.
The issue is not simply cost - it is confidence. When businesses cannot estimate energy costs with any conviction, they begin delaying capital spending, reducing expansion plans and preserving cash. That behavior may not appear immediately in headlines, but it is one of the most expensive economic consequences of prolonged geopolitical instability.
The first casualty of uncertainty is planning
War is a tax on decision-making.
The market often focuses on traders, but the more important reaction comes from boardrooms.
Chief executives do not make long-term investment decisions based on one dramatic headline. They react when uncertainty becomes persistent enough to impair planning.
If the Iran conflict remains prolonged, the economic consequences extend well beyond oil producers or defense contractors. Airlines face margin pressure; shipping companies deal with route disruptions and insurance costs; manufacturers confront unpredictable input prices; and consumer businesses begin reassessing demand assumptions.
War is a tax on decision-making. That tax is rarely measured directly, but investors feel its consequences through slower earnings growth, weaker business confidence and delayed investment activity.
Markets care about duration, not just escalation
A single geopolitical shock can be absorbed. What markets struggle with is duration.
The key shift in the current conflict is not simply the escalation itself - it is the growing possibility that tensions remain elevated. This changes the economic equation.
Short-term spikes in commodity prices create volatility. Prolonged instability begins altering behavior across the economy. Investors often underestimate that transition, because the first stage feels tradable. The second stage becomes structural.
The hidden inflation risk isn't immediate - it's cumulative
Most investors understand that war can push oil prices higher. What receives less attention is how prolonged uncertainty feeds inflation indirectly.
Fuel costs affect transport; transport affects logistics; and logistics affect retail pricing. Packaging, plastics and manufacturing costs all respond to sustained energy pressure.
The inflation effect is not always dramatic in week one - it builds. That creates a difficult backdrop for markets already sensitive to inflation expectations, central-bank credibility and slowing growth.
Investors should watch confidence, not just crude prices
If uncertainty persists and price swings remain violent, the economic damage compounds.
The critical indicator from here is not whether oil rises another $5 or $10 a barrel. It is whether volatility compresses or expands.
If markets stabilize, businesses can adapt. If uncertainty persists and price swings remain violent, the economic damage compounds even without an outright supply shock. The most expensive consequence of war is often not the price of energy itself; it is the inability of businesses, investors and consumers to confidently price what comes next.
That is the distinction investors should focus on.
Naeem Aslam is chief investment officer at Zaye Capital Markets in London.
More: Oil price charts produced a pattern not seen in 36 years. What happened last time?
Also read: America's day of fiscal reckoning draws closer
-Naeem Aslam
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05-12-26 1516ET

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The ongoing Iran conflict is causing significant uncertainty in the markets, which is more damaging than rising oil prices. While oil prices can be managed, volatile price swings hinder business planning and investment decisions. Prolonged geopolitical instability leads to delayed capital spending and reduced business confidence, affecting various sectors beyond oil producers. Investors should focus on market volatility and its impact on economic behavior rather than just crude prices, as the cumulative inflation risk builds over time due to sustained energy pressure.

The Iran war flashpoint isn't oil prices - it's not knowing what comes next