Par Par Me Charlotte Wright, founder of Wright Avocat
The current geopolitical context brutally reminds us of a truth that finance had relegated to the background: markets do not exist outside of the world. They are one of the most sensitive barometers of it.
The conflict between America, Israel, and Iran, the persistence of the war in Ukraine, tensions on strategic maritime routes, and the rise in energy prices are not separate crises. They form a system of risk that weighs on growth, inflation, stock valuations, and, most importantly, on the cost of capital.
The first signal came, as often happens, from black gold. For several days, Brent has been trading above $100, driven by supply disruptions from the conflict with Iran and the vulnerability of the Strait of Hormuz, which until recently accounted for nearly a quarter of global oil trade. On March 18, Reuters noted Brent at over $104, while the International Energy Agency announced on March 11 the largest coordinated release of strategic stocks in its history: 400 million barrels, evidence that the shock is no longer perceived as a mere speculative episode, but as a systemic threat to global energy supply.
This energy shock is not just bad news for households or industry. It is a financial shock. When oil remains at these levels for a sustained period, it becomes a central market variable: it fuels inflation expectations, weakens company margins, and mechanically increases the entire financing chain.
In other words, what investors now fear is not just classic warfare but inflation warfare.
The war in Ukraine reintroduced this logic in 2022. A regional conflict could have effects on energy, raw materials, logistics, and monetary policies. The Iranian conflict now adds a second tension focal point to the one that never disappeared. It is this combination that changes the nature of the risk: we are no longer talking about an isolated shock, but about a lasting fragmentation of the macro financial framework.
For equity markets, the mechanism is now well known. Rising energy costs squeeze margins, reduce earnings visibility, penalize energy-intensive sectors, transportation, industry, or discretionary consumption. Conversely, energy, defense, cybersecurity, or certain critical infrastructure benefit from a revaluation. But the key is not sector-specific. The key is that the geopolitical risk premium is rising everywhere.
For a long time, valuations were based on a liberal assumption that combined fluid globalization, relatively abundant energy, secure trade routes, and predictable central banks. That era is now cracked. The price of an asset no longer reflects only future cash flows; it once again incorporates the disorder of the world.
This is especially true for capital markets.
In an environment where an oil shock can delay rate cuts or revive inflation expectations, financing becomes more expensive, selective, and unstable. Bond issuances require more premium, market windows close faster, investors arbitrate more abruptly, and IPOs or capital increases become much more sensitive to any external incident.
Geopolitics thus acts as a multiplier of the cost of capital. For issuers, this implies a new requirement: not just to show performance, but to demonstrate resilience. Resilience in supplies, resilience in margins, resilience in refinancing, resilience in risk governance. The market no longer punishes only poor results; it now devalues strategic vulnerability.
The time when geopolitics was just a final paragraph in analysts’ notes has evolved. The Strait of Hormuz, sanctions, logistical corridors, energy infrastructure, defense capabilities, critical industrial dependencies: all of this now factors into stock prices. The global stock exchange and capital markets are not simply going through a temporary phase. They are gradually integrating a new reality where the world is more fragmented, more conflictual, more exposed to recurring energy shocks, and structurally more demanding for valuations.
In this new cycle, the question is no longer whether markets can still ignore geopolitics. The question is how long they can continue to absorb its cost.
(*) Charlotte Wright is a lawyer at the Paris Bar. Specializing in corporate law and securities law, she assists her clients in their strategic operations. After starting her career in Paris at the Fieldfisher law firm in corporate law/securities law, and then at the White & Case LLP firm in capital markets, she founded the Wright Avocat firm, where she is the founding partner. Charlotte Wright assists a wide range of clients: from high-growth potential companies to listed companies in France and internationally, investment service providers, investment funds, sovereign states, financial advisors, as well as executives and/or governance bodies. She holds two double degrees in international economic law and business law obtained from the University of Essex (UK), Toulouse Capitole University (France), and Stetson University (USA).
