Many global markets have enjoyed multiple years of double-digit growth as innovations in artificial intelligence have sent high-tech stocks soaring, but has the recent return of geopolitical uncertainty created a significant headwind in 2026?
Between the launch of OpenAI’s ChatGPT in November 2022 and the end of 2025, the S&P 500 rallied 70%, helping investors significantly grow their portfolios. Global markets have also soared in recent years, with the FTSE 100 growing 21% in 2025 and China’s Hang Seng index recording growth of 27.8%.
However, much of this growth occurred after widespread investor sell-offs in a high-inflation environment caused by the post-pandemic recovery and the economic shock of Russia’s invasion of Ukraine. Now, as geopolitical headwinds continue to grow in the Middle East, could investors be set for a return of high inflation and weaker growth?
Geopolitical Uncertainty and Inflation
The conflict in Iran has created significant challenges in the Federal Reserve’s ambitions to bring inflation back towards its 2% target. Following the closure of the Strait of Hormuz, a busy shipping lane that accounts for around 20% of global oil flows, the soaring cost of oil, which has reached highs of $167 per barrel, has created significant energy pricing pressures.
While a tentative ceasefire appears to have been reached, the impact of the closure and lingering geopolitical pressures is likely to place inflation under the microscope for the months ahead.
As escalations in Iran continued, the Organization for Economic Cooperation and Development forecasted all-items inflation in the US to reach 4.2% for 2026, a level that could inspire a hawkish reversion for the Fed’s monetary outlook.
The impact of high inflation on markets is strong because it can not only cause widespread fear among investors but is more likely to lead to interest rate hikes that can harm the growth prospects of companies.
“When inflation gets out of control, things can get …
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