15th March 2026

In my note earlier this month, we talked about geopolitics starting to matter more for markets than the usual run of economic data. At the time, it felt like markets were beginning to price risk — uncertainty around energy, shipping routes and global tensions — but without much changing on the ground just yet. 

Over the past week, that’s shifted. 

The discussion has moved from “this could be a risk” to “this is starting to affect how the system works”. 

And that’s an important difference. 

Here’s What Caught My Eye…

The recent escalation in the Middle East has brought this into focus. The issue isn’t just politics or military action in isolation — it’s location.

Some of the world’s most important energy routes run through a very small part of the map. When tensions rise there, markets don’t wait for oil supply to actually stop. They react when supply becomes harder to move.

Ships get rerouted. Insurance costs rise. Fewer tankers are willing to travel through certain areas. Freight becomes more expensive. Delivery times stretch out. 

None of that requires a full shutdown to matter. It just needs friction.

And friction adds up.

Why oil prices matter so much

A useful way this has been framed in recent research is that oil prices are the main transmission mechanism between geopolitics and the broader economy.

Importantly, we’re not yet in a classic “oil shock” like the ones seen in the past. History suggests that kind of shock usually requires oil prices to move well above current levels and stay there for a prolonged period.

But the margin for error has narrowed.

Even without a full‑blown crisis, higher and more volatile oil prices make life harder for central banks, businesses and households. Energy feeds into transport, food, manufacturing and logistics — so sustained pressure here quickly complicates the inflation picture.

That’s why markets have become more sensitive to oil over the past fortnight than they’ve been for some time.

It’s not just oil — it’s duration 

Another theme that’s come through clearly is that how long this lasts matters more than how dramatic the headlines look on any given day. 

Markets can usually look through short‑lived disruptions. What they struggle with is persistence.

Futures markets, bond markets and rate expectations have all started to reflect this uncertainty. Rate cut expectations have been pared back in several regions, not because growth is collapsing, but because inflation risks are harder to dismiss when energy costs are rising and supply chains are under pressure. 

This creates a more awkward backdrop for policymakers — and a noisier one for markets.

Context matters

It’s also worth noting that the latest bout of volatility hasn’t occurred in isolation.

Before the most recent events, energy prices were already firm, volatility was higher than usual, and market leadership had become quite narrow. We were already seeing large differences between what was working and what wasn’t.

That helps explain why the market response hasn’t been panicked — but it has been persistent. This feels less like a sudden shock and more like a continuation of a backdrop that’s been gradually becoming more uncertain.

How we’re thinking about it 

We touched on this in our Investment Committee meeting earlier in the week. The discussion wasn’t about predicting the next move in oil prices or reacting to headlines.

It was about recognising that the range of possible outcomes has widened.

When that happens, being precisely right matters less than being structurally sound. The focus shifts toward understanding where risks sit, how pressure might spread, and which parts of the system are more vulnerable if conditions deteriorate.

That doesn’t mean abandoning a central economic view. It just means being realistic about confidence levels — and not assuming the path ahead will be smooth.

The takeaway

Recent events have reinforced an important point.

Markets are moving away from abstract discussions about risk and toward very practical questions about how the global system functions under pressure. How easily goods move. How reliable supply chains are. How quickly higher costs filter through the economy.

That doesn’t mean poor outcomes are inevitable. But it does mean that risk awareness, resilience and a degree of humility matter more than they have for some time.

That feels like a sensible mindset for the environment we’re navigating right now.

For those who would like to explore the underlying commentary and source material behind these observations, contact me for our latest Falconer Advisers Macro Tones link.

As always, What Caught My Eye is intended to highlight the issues we’re spending time thinking about, not to predict outcomes, but to better understand the environment we’re operating in.

Remember, this note is general in nature and shouldn’t be construed as personal advice. Always seek financial or investment advice from a professional before acting on anything.

— Scott