by Jonathan Scott, Managing Director
The second quarter of 2026 has delivered a message that is hard to ignore. The global economy is far less flexible than many people assumed. For years, markets were discussed as if they floated above geography, as if capital, trade, and production could always find another route, another supplier, another workaround. This quarter has reminded us that they cannot do so indefinitely. The world economy is still anchored to ports, pipelines, straits, rail lines, storage terminals, insurance markets, and the political agreements that keep all of these things operating. When one of those pressure points breaks, the consequences do not remain local for long.
That is why the conflict around Iran has mattered so much. It has not simply created another round of dramatic headlines. It has exposed the degree to which the modern economy still rests on a handful of narrow and vulnerable corridors. The Strait of Hormuz remains the clearest example. Reuters reported on 9 April that traffic through the strait was still under 10 percent of normal levels despite the ceasefire announced the day before. Only seven vessels had passed through in the previous day, against a more usual figure of around 140. The backlog is expected to take weeks to clear. That is not a temporary inconvenience. It is a sign of a system under genuine strain.
I think one of the biggest mistakes in economic commentary is the assumption that markets can simply move on because a political announcement has been made. They cannot. A ceasefire can be declared in a sentence. Physical systems recover much more slowly. Mines still need clearing. Security still needs rebuilding. Insurers still reprice risk. Shipowners still hesitate. Ports still deal with congestion. The map changes first. The headlines catch up later. That gap between diplomatic language and logistical reality is where a great deal of the real economic damage now sits.
Oil has been the clearest expression of this anxiety. Reuters reported that Brent crude rose to about $99 a barrel on 8 April as concerns persisted over whether Hormuz would return to normal quickly, even after the ceasefire was announced. Barclays warned the next day that delays in restoring flows through the strait could push prices higher than its current 2026 Brent forecast of $85 a barrel, with supply disruptions still amounting to roughly 13 to 14 million barrels per day. Global inventories, according to Barclays, are now 1 to 2 million barrels per day tighter than previously expected.
Those figures matter because they show how thin the margin for error has become. The global oil market is not functioning as a broad and comfortable pool of interchangeable supply. It is functioning as a pressured network in which one severe chokepoint disruption can tighten balances almost immediately. Reuters also reported that some analysts believe global oil supply could remain 3 to 5 million barrels per day below pre-war levels for years even if a more durable peace eventually emerges. That should focus the mind. This is not just about a spike on a screen. It is about the possibility that a key part of the energy system has become structurally more fragile.
The deeper issue is that energy is never only about energy. Higher oil prices pass through transport, manufacturing, aviation, fertiliser, plastics, freight, and consumer budgets. Once fuel becomes unstable, almost every other sector is forced to either absorb the pain, pass it on, or cut back. What begins as a shipping disruption in one corridor can quickly become a broader cost problem for households and businesses thousands of miles away. That process is already underway.
One of the most revealing parts of this quarter has been the insurance market. It rarely receives public attention, yet it is one of the clearest indicators of whether the world’s commercial arteries are genuinely functioning. Reuters reported that elevated insurance costs and freight premiums remain a major drag on recovery in the Gulf, even with the ceasefire in place. Iran is also considering tolls of up to $2 million per passage for ships transiting Hormuz, a proposal that would add another permanent layer of cost and uncertainty to a route that already handles about one fifth of global oil flows.
That matters because the real economy depends on quiet, unglamorous systems continuing to work in the background. The shipping sector does not need a dramatic collapse to create serious damage. It only needs enough friction to make routes slower, dearer, or less dependable. Hapag-Lloyd said this week that even after stability returns, it will take at least six to eight weeks for normal operations to resume across its network, and that the crisis is costing the company about $50 million to $60 million a week. Around 1,000 ships remain stuck in the region. Numbers like that give the disruption weight. They turn an abstract geopolitical event into a measurable commercial problem.
I have always thought that some of the most useful information in a crisis sits in precisely these duller corners of the system. Not in the market slogan. Not in the dramatic political statement. But in whether ships are moving, whether cover is available, whether freight rates still make sense, whether suppliers can still promise delivery, and whether companies trust a route enough to use it. The economy is not held together by narratives. It is held together by functioning systems.
The war in Ukraine continues to reinforce the same lesson from another direction. It is tempting to treat Ukraine as an old story because the headlines have been running for years, but economic damage does not become irrelevant simply because it has become familiar. Reuters reported in February that Russian strikes on Black Sea ports had reduced export capacity by up to 30 percent over the winter, while also damaging vessels and rail infrastructure. Ukraine’s grain and iron ore exports have remained vulnerable to attack, delay, and higher costs.
This matters not only because Ukraine is an important exporter, but because it demonstrates how war can degrade an entire trade system rather than just interrupt one product. The port is struck, the railway is hit, vessels are damaged, energy outages follow, local businesses absorb more cost, and the disruption spreads outward. That is how regional war becomes a global economic tax.
There is also a more strategic layer to this. Reuters reported in 2022 that Ukraine’s two leading neon suppliers produced about half of the world’s supply of the key ingredient used in semiconductor production. That statistic has lingered in my mind because it captures the absurd concentration built into parts of the modern economy. A material most people rarely think about can suddenly become critical because so much high-end manufacturing depends on it. It is another reminder that the glamorous surface of the digital age rests on a very physical foundation of mines, gases, ports, processors, cables, and transport corridors.
Food security is another area where this quarter’s pressures are becoming visible. Reuters reported on 3 April that the FAO Food Price Index rose 2.4 percent in March to its highest level since September 2025. Wheat prices rose 4.3 percent over the month. Vegetable oils rose 5.1 percent. Sugar rose 7.2 percent. The FAO explicitly linked part of this rise to the energy shock associated with the conflict in the Middle East, warning that if the conflict persists, higher input costs could reduce fertiliser use, planting, and future supply.
This is where the interconnected nature of the system becomes impossible to ignore. Food is not only about harvests. It is about fuel, fertiliser, transport, storage, timing, and affordability. Reuters also noted that global cereal production for 2025 is forecast at a record 3.036 billion metric tons. On paper, that sounds reassuring. But aggregate production numbers do not erase distribution problems or freight shocks. A large crop is not the same as a stable food system if energy costs remain elevated and key export corridors remain vulnerable.
I am wary of commentary that reduces this to a single chart and pretends the conclusion is obvious. The food system is not a neat line on a page. It is a vast geographical network under constant pressure from weather, politics, shipping, and cost. When any one of those pressures intensifies, the strain spreads. This quarter has not created that truth. It has simply made it much harder to ignore.
Asia has particular reasons to watch these developments carefully. South Korea, Japan, India, Taiwan, and China all sit downstream of many of these risks, especially in energy and trade. Reuters reported that buyers across Asia responded to the Hormuz disruption by releasing reserves, increasing subsidies, and securing extra cargoes. Taiwan’s CPC, for example, moved to secure 2 million barrels of crude to cover more than two weeks of supply. Traders and refiners began cautiously chartering tankers again after the ceasefire, but only cautiously. That is an important distinction. The mood is not one of restored confidence. It is one of guarded adaptation.
This is why I think resilience is replacing efficiency as the central economic priority. For years, redundancy was often treated as waste. Stockpiles looked expensive. Alternative suppliers looked inefficient. Domestic capacity looked inferior to leaner global outsourcing. That logic worked well in a world where peace, security, and cheap transit were taken for granted. It works less well in a world of blockades, sanctions, missile strikes, freight disruptions, and strategic tolls.
That shift has consequences. It means higher costs. It means more duplication. It means more inventory and less faith in perfect timing. But it also means an economy less exposed to a single choke point or a single supplier. In other words, resilience has a price, but so does fragility. The past quarter has shown that fragility can be very expensive indeed.
My own view of the remainder of 2026 is cautious. Not apocalyptic, but cautious. I do not think the central question is whether peace headlines will occasionally lift markets. They probably will. The more important question is whether the underlying systems of transport, energy, insurance, food movement, and materials supply can regain genuine resilience. At the moment, the evidence suggests they remain fragile. Hormuz is still far from normal. Black Sea logistics remain exposed. Food prices are already feeling the effect of energy costs. Shipping networks are still dealing with backlog and delay.
The real price of conflict is not captured by one day’s oil spike or one week’s market reaction. It is found in the slower erosion of certainty. It is found in higher freight bills, delayed shipments, defensive stockpiling, reduced flexibility, and the gradual reordering of investment around security rather than pure efficiency. That, to me, is the real theme of this quarter. Geography has returned to the centre of economic life, and it is unlikely to leave the stage any time soon.