As tensions rise in the Middle East, the global economic ripple effects are becoming harder to ignore. In this edition of Macro Trends, we examine the shifting dynamics of global shipping routes, the volatility in oil markets, and the response of global equities. We wrap up with a look at which global risks are dominating headlines—and why it matters for economists, analysts, and decision-makers navigating today’s uncertain landscape. Backed by real-time data and objective analysis, this piece cuts through speculation to highlight what the numbers are telling us.

Tanker Traffic Amid Rising Middle East Tensions

Strait of Hormuz

The Strait of Hormuz is one of the world’s most critical oil chokepoints, with roughly a fifth of global crude supply passing through it every day. It serves as a vital link between the Persian Gulf’s largest oil producers — including Saudi Arabia, Iraq, and Iran — and international markets.

The path of global tanker traffic from 2023 to 2025 was shaped by rising tensions between Iran, its proxies, and Israel. In the Strait of Hormuz, traffic dropped sharply following the October 7 attack but stabilized by April 2024.

It was not until Iran launched Operation True Promise II on October 1, 2024, that traffic fell sharply once again, driven by fears of a significant escalation of the conflict.

Suez Canal and Bab el-Mandeb Strait

Activity across the Suez Canal and the Bab el‑Mandeb Strait reflected the strain of these geopolitical events.

After peaking in late 2023, traffic at both chokepoints declined sharply throughout early 2024, weighed down by concerns of a broader conflict in the Middle East.

This trend persisted well into mid‑2025, with traffic at both crossings remaining far below long‑term averages — a clear sign of the lasting impact of Middle Eastern tensions on global trade flows.

Middle East Oil Production

The chart shows Middle Eastern oil production levels in 2024 compared to historical ranges and 2023–2024 changes, highlighting the dominance of Saudi Arabia, Iraq, and Iran within OPEC.

Oil prices drop amid de-escalation in Middle East

The path of crude oil prices in 2025 has been far from smooth. Brent crude surged by about $8 in early January, reaching approximately $81 per barrel - a 4-month high - driven by renewed sanctions on Iranian and Russian oil, as well as a harsh winter across the Northern Hemisphere.

In the second quarter, prices fell sharply. The downturn was fueled by growing concerns over a weakening global economy, following a 0.2% contraction in U.S.

GDP during Q1, along with declining refinery activity. Adding to the pressure we renew U.S. tariffs announced by Donald Trump, which heightened fears of a global slowdown and further weighed on oil markets.

In early June, the trend reversed as geopolitical tensions in the Middle East escalated. Prices spiked after the U.S. launched an attack on Iran’s nuclear facilities, triggering fears of supply disruptions. However, a subsequent de-escalation in the region brought unexpected relief to global markets —leading to a sharp pullback in oil prices, which dropped by more than 8% in a single day.

Where should US oil be? A fair value model for WTI crude

There are many ways to estimate the fair value of crude oil, using a variety of models. In our case, we’ve constructed a simplified fair value model for WTI crude using the Macrobond’s regression tools, incorporating several dimensions of the U.S. economy.

The model includes:

•Macroeconomic indicators such as GDP and PMI;

•Financial variables like government benchmarks and the U.S. Dollar Index (DXY);

•Oil sector dynamics including the spread between12-month and 3-month futures, oil production levels, and the number of active oil rigs;

•Geopolitical factor, represented by the Geopolitical Risk Index (GPR) developed by Matteo and Iacovelli.

While the model is intentionally simplified, it still provides useful insights into the structural drivers of oil prices — and offers a perspective on where crude oil "should" be priced under current economic and geopolitical conditions.

When oil bursts from the depths, which sector follows?

The impact of crude oil price movements on the broader economy can be substantial, but different sectors tend to react in different ways.

Energy sector, as expected, remains the most closely tied to oil prices. Currently, it shows a correlation of around 0.7 with daily oil price changes.

Industrials and Materials, which have historically exhibited moderate correlations with oil(typically in the range of 0.2 to 0.3), are now showing significantly weaker relationships — falling closer to 0.1.

Meanwhile, Utilities and Consumer Staples — sectors typically considered defensive or counter-cyclical — often show negative correlations with oil prices; with Consumer Staples showing the highest inverse correlation.

Reaction of the TA-35 Index amid major events in Israel

There action to the October 2023 Hamas attack and Israel–Gaza war was sharp, with the index falling quickly in the first days, though it recovered relatively quickly and returned to pre‑attack levels within a month. The Iran–Israel military escalation in June 2025 caused an initial drop, followed by a strong rebound, suggesting resilience despite heightened tensions.

Meanwhile, the Second Intifada (2000) had a more sustained and significant negative impact, with the index trending down sharply and struggling to recover even 80days later.

In contrast, the Oslo Accords (1993) and Abraham Accords (2020) coincided with notable gains, indicating periods where optimism about peace supported market performance.

What the world feared most? - Top geopolitical threat by year

Matteo & Iacovelli’s Geopolitical Risk (GPR) Index has emerged as one of the most effective measures of global geopolitical threats.
By analyzing the share of newspaper articles related to specific geopolitical topics, the index — along with its subcomponents — offers a unique visual narrative of what humanity feared most in each era of modern history.

From the outbreak and escalation of the World Wars, to the nuclear tensions of the1950s and 60s, the Cold War arms race, and the twin waves of terrorism in the late 1980s and early 2000s, the GPR Index captures the shifting landscape of global anxiety.