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Macro Economy•20 April 2026•

1 min read

US-Iran Conflict Impacts: Inflationary Pressures and Russell 2000 Volatility

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Key Facts

1Expectations that increased energy costs and supply constraints will drive inflation higher and pressure growth.

2Volatility of Russell 2000 skew increased during the initial weeks of the conflict.

3Markets remained generally sanguine despite ongoing geopolitical tensions.

A recent report from Seeking Alpha highlights that the ongoing conflict between the US and Iran has driven energy costs higher, reinforcing expectations for global inflation. Supply constraints are currently pressuring productivity levels and overall economic growth projections. Analysts observed a significant increase in Russell 2000 skew volatility during the initial weeks of the conflict, reflecting investor anxiety regarding small-cap equities. Despite these geopolitical tensions, markets have remained generally sanguine as much of the risk was priced in following the initial conflict cycle. However, the closure of the Strait of Hormuz remains a critical factor necessitating a reassessment of global wealth and growth forecasts. Investors are now focusing on hedging instruments such as XAU/USD and energy ETFs like USO to navigate potential market turbulence.