How an Extended Middle East Conflict Could Affect the ASX and Broader Economy
It has been about two and a half weeks since the Middle East conflict started, and has already disrupted global markets and the broader economy. If the conflict lasts longer, here is how it could impact the ASX and the broader economic landscape.
The current Middle East conflict has had enormous impact on the global economy so far including Australia.
Since the United States and Israel carried out coordinated strikes on Iran on 28 February 2026, global markets have faced a situation not seen in years which is a real war premium reflected in oil prices and higher inflation forecasts.
This situation has already affected monetary policy because the Reserve Bank of Australia raised the cash rate by 25 basis points to 4.10% on 17 March 2026 which reversed much of last year’s rate cuts due to rising inflation risks.
Energy producers such as oil and gas companies on the ASX usually benefit the most because higher crude prices increase both revenues and margins.
Defence related companies can also perform well because long geopolitical tensions often lead to higher government spending on military capability and security systems.
Airlines, logistics and transportation sectors face pressure because they depend heavily on fuel and rising input costs are difficult to fully pass on to consumers.
Banks can see mixed effects as while, higher interest rates support margins, slower growth and rising defaults can reduce those benefits over time.
A prolonged conflict increases inflation because oil and energy prices rise which pushes up transportation, manufacturing and overall input costs across the economy.
A prolonged conflict creates risks through inflation and volatility but it also offers selective opportunities for investors who focus on a disciplined long-term approach.
Source - RBA, Veye Research
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