By Sophie Kiderlin, Niket Nishant and Samuel Indyk
LONDON, March 13 (Reuters) – World markets, rocked by a Middle East war that could trigger another inflationary shock, are looking back at the play book from Russia’s invasion of Ukraine in 2022 for clues on what’s next.
Back then, with the global economy emerging from the COVID-19 pandemic, surging energy prices magnified already rising inflation, equities fell, and investors sought safety in the dollar.
“There are some parallels, in the sense that the global economy is weak now because of the trade war,” said George Lagarias, chief economist at wealth manager Forvis Mazars.
“There is an underlying inflationary force, which is the trade war, that could be exacerbated by a hike in oil prices.”
CRUDE SHOCKWAVE
There are some similarities in the way markets are reacting to the Middle East war to the early days of the Russia-Ukraine conflict in February 2022.
Energy market volatility has rivalled the turmoil seen after Russia invaded Ukraine, with Brent crude oil soaring around 40% since the U.S.-Israel strikes two weeks ago and nearing $120 on Monday.
In 2022, Brent settled around 15% higher at the two-week mark, having hit its highest since 2008.
The oil market has “moved from an essentially frictionless supply-side world for the decade or two before the pandemic, to what is now a world that is being consistently hit by one supply shock after another”, said William Blair’s macro analyst Richard de Chazal.
The dollar has also risen 2.6% since the Middle East war began, matching its gain in 2022 over the same number of days.
SAFE HAVEN SHAKE-UP
But other assets have behaved entirely differently.
European wholesale gas prices have seen a near 58% rise this time around, a relatively muted reaction compared to 2022’s nearly four-fold jump, reflecting Russia’s role as a major gas supplier.
Among safe havens, Germany’s 10-year Bund yield has jumped 30 basis points since the Iran war began, versus a more than 10 bps fall four years ago.
Markets have been quicker to price in expectations of rising inflation this time – in 2022, yields rose sharply after their initial fall as pricing pressures became clearer.
Those fears seem more muted this time around, and the euro zone’s five-year forward inflation swap, which spiked sharply in 2022, remains well-anchored at around 2.18%, near the ECB’s 2% target.
But underlying inflationary impulses are similar to four years ago, when post-pandemic price pressures forced aggressive global rate hikes. Forvis Mazars’s Lagarias downplayed the likelihood of similar moves near-term.
“They’ll (central banks) need to see real inflationary pressures for two to three months in the core numbers,” he said.
“That is unlikely to happen, and if it does, it’s probably not because of Iran.”
Elsewhere gold, which spiked almost 8% when Russia invaded Ukraine, has fallen some 3% since the Iran war erupted.
RBC strategist Christopher Louney said the clear line from the crisis to energy markets meant there was less “immediate need for a general-purpose hedge”, contributing to gold’s weakness alongside higher bond yields and the dollar.
EUROPEAN SHARES PLAY COPY CAT
Four years ago, European stocks faced a sharp selloff, dropping about 10% within the first two weeks of war. This time, they are down 5%.
In 2022, Europe was in the eye of the storm geographically and because of its energy dependency on Russia. While the Middle East is further away, Europe’s dependency on energy imports still makes it vulnerable.
Barclays equity strategists said Europe’s STOXX 600 index could go towards 550 points if oil stays near $100, a roughly 13% fall from its closing level on February 27.
One difference is European market conditions preceding the conflicts.
While shares were at record levels before this crisis thanks to a diversification away from U.S. assets and European stimulus, equities had already retreated in 2022 anticipation of Russian invading Ukraine.
BAD ENERGY
The CBOE oil volatility index has reached a five-year high of 120%, surpassing a peak of 102 hit after Russia invaded Ukraine in 2022.
But beyond energy, volatility is nowhere near what is generally considered crisis territory. At roughly 25, the VIX index of equity volatility is running warm, but below April 2025’s highs of 60 and below the COVID highs of 80.
In February 2022, it touched a high of 38, before retreating.
The ICE BofA MOVE index of bond volatility has risen to 95, its highest since June 2025, still below a high of 140 in early March 2022. FX volatility has barely budged.
(Reporting by Niket Nishant, Sophie Kiderlin, Amanda Cooper and Samuel Indyk; Editing by Dhara Ranasinghe and Jan Harvey)
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