Iran Conflict

Market Adjustments Intensify While CRE Performance Remains Steady 

Geopolitical conflict disrupts energy flows. The blockade at a key maritime choke point is limiting global energy transit, elevating price volatility, and introducing broad uncertainty. 

• Military action in Iran has disrupted oil and liquid natural gas trade flows through the Strait of Hormuz, creating immediate supply constraints and wide price fluctuations.
• The blockade has curtailed roughly 20 percent of global oil and LNG shipments and disrupted other key commodities.
• The Middle East supplied just over 23 percent of non-Chinese primary aluminum output in 2025 — much of it exported via the strait — and roughly one‑third of global fertilizer trade also moves through the corridor.
• Commodity prices have risen sharply, with frequent intraday swings amid fluid conditions and constrained logistics.
• WTI crude peaked at $119 per barrel on March 9 before retreating to the high-$80 range amid prospects for de-escalation and the IEA’s release of 400 million barrels from strategic reserves.

Inflation risk and policy reassessment come to the forefront. Energy-driven inflation is restraining expectations for easing monetary policy, reshaping potential GDP outcomes in 2026.

• Higher energy costs threaten to raise food prices, disrupt supply chains, and weigh on business and consumer confidence.
• This pressure complicates central bank policy, raising the likelihood that the Federal Reserve keeps rates higher for longer.
• Wall Street has revised its outlook from expecting two to three rate cuts in 2026 to anticipating just one. 
• In response, treasury yields have already moved higher, with the five-year and 10-year Treasurys rising roughly 20 to 30 basis points since late February
• Macroeconomic outcomes now hinge on conflict duration, with a short disruption implying mild effects.
• A prolonged or infrastructure-damaging scenario could potentially trim 20 to 100 basis points from 2026 GDP growth and push inflation toward the 3 to 4 percent range.

Limited U.S. CRE impact amid broader volatility. The conflict's economic spillovers are expected to have only modest, uneven effects on domestic fundamentals across property types.

• Industrial demand may soften slightly as trade disruptions and transportation constraints pressure the movement of goods.
• Retail properties could experience modest pullbacks in discretionary spending, as higher gasoline prices and increased caution weigh on household spending and tenant demand. 
• Apartment and office demand could see minimal, primarily indirect effects unless business sentiment weakens markedly, potentially slowing job creation.
• An elevated interest rate environment may restrain investment activity, though heightened equity market volatility could redirect capital toward commercial real estate to diversify and stabilize investor portfolios.
• Built-in rent escalations and shorter lease terms in property types such as multifamily and self-storage enable faster mark-to-market, particularly in a high-inflation climate. 
• Heightened macro uncertainty can reallocate capital toward CRE as a portfolio stabilizer, offsetting slower deal flow driven by higher borrowing costs and underscoring the relative durability of commercial real estate assets. 

* Baseline, 100 = Feb. 23, 2026
Sources: Marcus & Millichap Research Services; Blue Chip; Capital Economics; CME Group; Costar,
Inc.; Federal Reserve; Forbes; International Aluminum Institute; JPMorgan; KPMG; Morgan
Stanley; Real Capital Analytics; S&P Global; U.S. Energy Information Administration