Escalating conflict in the Middle East could lead to a prolonged disruption to global energy markets, rather than a short-lived oil price spike, according to VanEck deputy head of investments Jamie Hannah. VanEck offers a range of exchange-traded funds (ETFs) providing investors with exposure to various asset classes and investment strategies. The firm aims to provide innovative and accessible investment solutions.
Hannah noted the market initially treated tensions in the Gulf as a temporary shock, with oil and equity markets experiencing fluctuations of around 5 per cent to 10 per cent before stabilising. However, he believes the risk of a more sustained disruption is rising. “The market sees Middle East tensions and thinks ‘short-term oil spike’. That may be too narrow a view this time around. Rather than a transitory shock, we may be entering a situation that lasts months,” Hannah stated.
He further explained that the potential disruption to the supply of crude oil and LNG could have far-reaching implications beyond initial market reactions, affecting the structural functioning of the energy ecosystem. Hannah highlighted the possible shutdown of the Strait of Hormuz, which handles approximately 20 per cent of global crude oil and LNG flows, as a significant concern. Combined with limited spare capacity from OPEC+, this creates a heightened risk of sustained instability in energy markets.
Additionally, Hannah pointed out that artificial intelligence is driving a structural increase in demand for electricity and critical minerals, as data centres and high-performance computing infrastructure require substantial power. This increased demand supports commodities such as lithium, copper, and rare earths, while also reinforcing the role of traditional energy sources needed to maintain grid reliability.
