Market view April 2026 – The Fog of War
The attack on Iran and the closure of the Strait of Hormuz to shipping traffic have led to a correction in the financial markets. Global stocks have fallen 8 percent since the peak before the war started, while the energy-heavy Oslo Stock Exchange has risen 9 percent during the same period. Higher prices for energy and fertilizers have increased inflation expectations, and interest rates have risen globally.
“The first casualty of War is Truth”
In Norway, the market's expectation for future interest rates has changed from rate cuts to now pricing in two rate hikes from Norges Bank by the end of the year. What the outcome will be depends on how long it takes before oil flows freely again. In the meantime, the markets swing between fear and hope based on rumors and disinformation from the parties in the war.
Why hasn’t the stock market fallen more?
The US and Israel's attacks on Iran have escalated the war in the Middle East that has been ongoing since the terror attacks in October 2023, and most countries in the region are now directly affected. The consequence of the shipping traffic through the Strait of Hormuz being closed is now felt worldwide.
A month ago, oil supply was greater than demand, and the price of a barrel of North Sea oil fluctuated between 60 and 70 U.S. dollars. Now we are lacking over ten million barrels a day, and we are at the beginning of what could become a new energy crisis.
The raw materials markets believe this will resolve itself before the consequences become too great. The spot price of oil and gas has risen, but is well below levels from when Russia invaded Ukraine in 2022. The prices for the delivery of oil and gas over the next year in the futures market are significantly lower than the spot price. Therefore, the fall in the stock market is not greater than what we can call a normal correction.
That Iran would close the Strait of Hormuz was probably not a surprise to the Pentagon. The absence of mine sweepers and escort ships suggests that Trump's inner circle was prepared for a short war, between 4 to 6 weeks according to rumors, and that an invasion of Iran was never an option.
The hope was perhaps that the regime would fall within a short time, which does not seem likely now. The most probable outcome is that the US and Iran negotiate a solution, even though it may be difficult to envision.
Both parties should have incentives to stop hostilities soon. Iran needs the income from oil sales and desires the lifting of economic sanctions. The war is unpopular among American voters and it is important for the Republicans to avoid price shocks on gasoline and food before the election in November.
It may be that President Trump believes there is still a window of time to escalate the conflict to gain an advantage in negotiations. It may also be that the pain point has already been reached. Few know. But it seems unlikely that the world can accept a situation where the Strait of Hormuz remains closed through April.
The energy crises of the 1970s resulted in high inflation, interest shocks, unemployment, and weak stock markets. The parallels to today are uncomfortable, and there is likely strong pressure to resolve the conflict as quickly as possible. Therefore, we believe the market's reaction to this so far has been correct.