WS #2510

The Iran-Israel conflict has escalated sharply, with direct military strikes now targeting energy infrastructure, marking a dangerous new phase. The Iranian military has warned it will close the Strait of Hormuz 'indefinitely' if US bombs its energy facilities, while also threatening to attack Middle Eastern electrical plants powering US bases and critical regional infrastructure like desalination plants. This raises the specter of severe disruptions to global oil supply (already down 20% according to Centrica's CEO) and broader regional energy/water supplies, intensifying the geopolitical risk premium. The IEA chief has warned the crisis equals the 1970s oil shocks combined with Ukraine war fallout, posing a 'major, major threat' to the global economy, with the agency indicating it could release strategic petroleum reserves to stabilize markets. Financial markets are already reacting: Indian benchmark indices have dropped over 12% since January, with foreign institutional investors selling over $8 billion in equities this month, threatening the world's busiest IPO market as companies like PhonePe halt listings. US Treasury yields are rising as the conflict stokes inflation fears. In the UK, Prime Minister Keir Starmer is holding a Cobra meeting to address the economic impact, with warnings that price rises are 'inescapable' and global oil supplies down 20%. Specific sectors are under strain: India's fertiliser supply is at risk with 26% of imports sourced from West Asia, and Delhi power rates may rise due to discom dues. In corporate news, Nvidia's CEO Jensen Huang proposed giving engineers 'AI tokens' on top of salary, signaling aggressive AI workforce expansion, while Tesla's Elon Musk detailed the Terafab AI chip project aiming for extreme production scale. Apple's shift to Gemini for Siri marks a historic competitive shift. However, these tech developments are overshadowed by the immediate market impact of the Middle East conflict, which is driving oil price volatility, equity selloffs in emerging markets, and broader economic uncertainty.