Iran, markets, and meaning: separating signal from noise
The US–Israeli strikes on Iran have generated a flood of information for business leaders to absorb. Oil prices have moved sharply.
Shipping risks have risen. Insurance has been repriced. These effects are real and costly, and they require immediate operational attention. But however headline‑making they are, and however real and challenging their short-term effects, these impacts are best understood as noise. There is a strong likelihood that, in time, prices will revert and markets will adjust.
In this case, as in an increasing number of episodes in today’s ‘polycrisis’ world, that is not the whole story.
As we set out in the first risk scenario of our Top Risks for Business report, ‘Crisis hits, we’re not prepared’, it is critical not to lose sight of the long term while managing the immediate. Alongside short‑term impacts, Australian business leaders need to focus on the longer‑term structural effects, the proverbial iceberg in the distance. Here, those structural effects concern how power is used in the international system, and what that means for business decisions long after prices settle.
It is important to note that none of this analysis should obscure the tragic loss of life in Iran and across the region, nor the profound human, political, and economic damage the violence is inflicting on communities far beyond the immediate theatres of conflict.
Noise
The short‑term impacts of these strikes are well documented. Commercial shipping through the Strait of Hormuz has slowed sharply. Ship‑tracking data pointed to a fall of roughly 70 per cent in vessel traffic as operators and insurers reassessed risk, even without a formal blockade. Energy markets reacted quickly. Brent crude moved from the low $70s into the $80 range as a ‘war premium’ was priced in. Freight costs, coverage terms, and delivery schedules adjusted as vessels were diverted or paused and insurers shortened or withdrew coverage for certain transits. European short-term gas prices doubled.
None of this is unusual. In fact, oil prices reached these levels in June last year, following attacks on Iran’s nuclear facilities, returning to trend after about a week. Even accounting for the expansion of conflict through the region, comparable geopolitical shocks over the past decade support the expectation that markets can and do adapt, even after sharp disruptions. Recent statements from the Reserve Bank of Australia note that while a Middle East-driven oil supply shock could add to short-term inflation pressure, it is too early to judge persistence, and such shocks remain, for now, challenging but economically absorbable.
That expectation is not misplaced. Markets absorb shocks and prices often revert as conditions stabilise. However, the US-Israel strikes on Iran are also a signal of something far more fundamental. Not only, as RBA Governor Michelle Bullock notes, are these shocks going to become more frequent – a “manifestation of ratcheting geopolitical uncertainty” – we are also witnessing a deeper structural shift in the way power is used, both domestically within the US, and within the international system. For business leaders, these shifts challenge long-held assumptions about stability, restraint, and predictability in global markets.
Signals — maintaining order or undermining it?
Both US domestic arrangements and the international system place limits on the use of lethal force, and those limits have been stretched by the strikes on Iran.
In the United States, constraints on presidential war‑making are designed to prevent unilateral or impulsive use of force. In this case, the President ordered strikes without prior congressional authorisation, with Congress notified after the fact. As a result, Congress shifted from deciding whether force should be used to debating whether it should be sustained. Supporters argued the strikes fell within the President’s authority as Commander in Chief; critics argued they hollowed out Congress’s war powers. No consensus emerged. The effect is that US domestic politics increasingly acts as a direct variable in the timing, credibility, and durability of US military commitments, increasing the risk of abrupt shifts driven by internal politics rather than external conditions.
Internationally, the prohibition on the use of force is set out in Article 2(4) of the UN Charter, with narrow exceptions for self‑defence or Security Council authorisation. Beyond these formal rules sit shared expectations: that force is exceptional, not routine; that leaders point to recognisable justifications; and that some form of accountability follows. These expectations exist to ensure that the use of force is constrained rather than discretionary. At a minimum, there is an expectation that force must be justified by a recognisable reason rather than personal preference or political mood.
Israel’s domestic decision‑making framework is different from the US’, concentrating greater authority in the executive and security cabinet, particularly on matters framed as existential defence. As a UN member state, Israel is also bound by the Charter’s limits. In this case, it has justified its actions as necessary to prevent future existential threats, including Iran’s nuclear capability, and has treated leadership targeting and deep strikes inside another state as consistent with that logic. Legal analysis generally grounds this claim in self‑defence doctrine, while acknowledging that it stretches accepted thresholds for imminence and necessity, reinforcing a broader shift in how force is being used and defended in practice.
Taken together, the March 2026 US–Israel strikes signal a meaningful shift in how the acceptable use of power and force in the rules‑based order is interpreted in practice. The formal prohibition on force remains, but powerful states are arguing that preventive action, leadership targeting, and pressure on regime stability are consistent with it. None of these elements is new in isolation. Combined, they expand what is treated as acceptable state practice under the banner of maintaining order. That shift becomes more entrenched when close allies publicly frame the strikes as consistent with defending international law and the rules‑based order, even as some analysts argue they further undermine it.
So what for Australian business?
For Australian business, this stretching of the acceptable in how power is exercised and justified matters because our economy relies on a world of predictable rules, stable trade routes, credible commitments, and confidence that power is constrained rather than discretionary. When force is used more readily, legal boundaries are stretched, and alliances substitute for process, risk becomes harder to price and shocks become harder to contain. Decisions that once sat firmly in the political or security domain now spill faster into energy costs, logistics, regulation, sanctions, market access, and reputation.
While oil prices and shipping times may revert back to the norm, over time, this shift in the acceptable use of power raises the baseline level of uncertainty Australian firms must plan for, particularly given our dependence on open sea lanes, international law, and major‑power stability. The practical implication is not constant crisis, but a need for boards and executives to adjust how they think about exposure, resilience, and downside risk in a system where rules still exist, but are applied more flexibly, selectively, and politically than before.
