Iran War Why Oil Is Heading for Its Biggest Weekly Gain in Four Years — and What Comes Next

Mar 6, 2026 - 12:00

Early European gains have faded as we close out a historic week that looks more dangerous with each passing day. What many had hoped would be a short-term conflict and swift overthrowing of the regime looks to be anything but that, and for European markets there is a particular sensitivity to gas prices that spiked at the beginning of the week but stabilised since. For today, the notable areas of strength within the FTSE 100 comes in the form of defence names, and oil & gas stocks.

Oil prices have continued to rise, as we head towards the biggest weekly gain in four years as hopes of a swift resolution in Iran fade. For markets, they are waking up to the possibility of a sharp increase in energy costs and inflation if this conflict runs on for weeks, with the differing levels of storage available within each country signalling that one-by-one we could see production facilities shut down without the ability to export or store their oil. From a Iranian perspective, the decentralised nature of the ballistic and drone attacks does signal the high likeliness of continued conflict as long as the US and Israel seek regime change.

The strategic targeting of regional infrastructure represents almost a worst-case scenario in terms of the global economic impact of this crisis, with the flow of oil, gas, chemicals, and goods all impacted. The Iranian decision to bring the other GCC nations into the fold certainly maximises pressure both from regional powers and global markets, with the prospect of a global surge of inflation growing increasingly likely with each passing week. Meanwhile, the fears are that we could see the situation worsen if Iran seeks to target the East-West pipeline that Saudi Arabia have been utilising to funnel oil the Red Sea and out through the Suez Canal. The risk here is that we not only see Iran target the pipeline, but Houthi militia once again close the Red Sea to further turn the screw of global supply chains and energy prices.

Looking ahead, you would be forgiven to case aside any considerations of the economic calendar, but today does bring the US jobs report for February. Coming at a time where inflation expectations are on the rise, the prospect of Kevin Warsh pushing through a rate cut in his first meeting appears to be somewhat optimistic. Particularly so if we see another strong payrolls figure after last month’s beat of 130k. For the dollar, the recent resurgence has been built on a combination of haven demand and adjusting rate expectations. Thus, another better-than-expected jobs report could provide another push higher for the dollar index. Nonetheless, the Fed will undoubtedly be looking into the nuts and bolts of the recent payrolls data, noting how incredibly concentrated the job creation has been towards education and healthcare employment. With that in mind, there will be a particular focus on the breakdown of job creation as we seek to gauge business hiring against a backdrop of shifting tariffs, policies, incentives, and AI products.

Commentary provided by Joshua Mahony, Chief Market Analyst at Scope Markets

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