Note: This article addresses the financial and market implications of the 2026 US–Israel–Iran conflict for Muslim investors. It does not minimise the profound human cost of this war, which has affected Muslim communities across the region. Our thoughts and prayers are with all those affected. This is not financial advice.
When conflict breaks out in the Muslim world, Muslim investors do not think about the conflict in a detached manner. Their portfolios, assets and investment decisions are no doubt affected by the conflict in the region and indeed the world at large. But, as Muslim investors, their primary concern is also the well-being of the ummah in general and in particular those suffering in the conflict zones in the Muslim world, such as in Iraq, or Syria, or Yemen or Palestine. The conflicts in these Muslim nations that are so rich in heritage and Islamic history naturally affect investors and, indeed, all Muslims around the world. At the same time, Muslim investors have responsibilities, not just to their families, but also to their assets, whether fixed or liquid, and the resulting zakat obligations that must be fulfilled on time.
A war that started on 28 February 2026, following a series of US and Israeli air strikes on Iran, which resulted in a partial closure of the Strait of Hormuz, created the largest energy supply disruption to hit the world’s oil market since the oil crises of the 1970s. For Muslim investors this was not just a non-stop roller-coaster of trading in the world’s stock markets, futures markets and commodities exchanges. They were, and continued to be, concerned to understand and respond to its effects on their wealth. This book argues that their concern to understand the crisis is a necessary part of their proper Islamic stewardship of God-given wealth.
What Has Happened to Energy Markets
In the wake of Israeli and US air strikes on Iran, the strategic waterway of the Strait of Hormuz, only 82 miles long, was briefly closed to oil traffic. Approximately 20 million barrels of oil are transported through the narrow Strait every day, accounting for about 20% of oil supply globally. That number translates into $120 per barrel of Brent crude in immediate increases, and markets are already feeling a 20% drop in global LNG supply. As a result, insurance companies withdrew war-risk coverage from companies operating in the region, effectively grounding the world’s tankers, regardless of the level of actual military risk involved.
Fatih Birol, the executive director of the International Energy Agency, described the collective impact of the situation on the world oil market as being the equivalent of both the 1970s oil crises and the 2022 gas crisis combined. Over 40 energy and petroleum assets and properties in at least 9 countries have been severely damaged in the unrest. Gulf energy exporters including Saudi Arabia, the UAE, Iraq and Kuwait are reportedly cutting production because they are unable to export the oil. Storage facilities are filling up with oil because there is no place to send it.
The outlook for oil prices has been upgraded by Oxford Economics with Brent averaging around $114 per barrel in Q2 2026. In its European Economic Outlook Q2 2026 report, it notes that this, combined with European gas prices which are currently 60% above pre-conflict levels, will translate into ‘widespread disruption to supply chains of petrochemicals, fertilisers and many other commodities driving the energy shock into an economic squeeze’.
Three Scenarios for the Months Ahead
A flurry of predictions from analysts and research groups paints a three-picture outlook for stocks. Which one will become reality?
Scenario 1: Early Diplomatic Resolution (Base Case)
A US–Iran deal within the next few weeks – possibly involving a transfer of power in Iran and the gradual reopening of the Strait – could see Brent stabilise around $70–$85 by year-end as supply is priced back into the market. Equities would also react positively on a credible sign of peace, as they already did in late March when Trump said he was talking to the Iranians. That energy shock would be sharp but short-lived, taking two to three quarters to be worked off.
Scenario 2: Prolonged Conflict and Partial Disruption (Elevated Risk)
Yet fighting could continue without a resolution, and the Strait might partially reopen – and thus allow for half of pre-conflict oil shipping traffic to resume by May. This in turn might keep oil prices in the $100-$115 per barrel range for most of the year. Oxford Economics estimates an average daily supply disruption of 7.5 million barrels through Q2. This would, once again, lower estimates for GDP growth, and keep inflation pressures high, all the while forcing monetary policymakers to choose between higher interest rates to combat inflation, or lower interest rates in order to support growth.
Scenario 3: Escalation and Infrastructure Targeting (Tail Risk)
It seems to us that if Iran goes for oil supply attacks along the Gulf, targeting refineries, storage terminals or pipelines in Saudi Arabia, the UAE or even (preposterous as it sounds at the time of writing) Qatar, the price of Brent could promptly burst through the $130 per barrel level and probably stay there for a while. The risk is even that this price shock will turn into a real supply shortage in certain parts of the world, notably in Asia and Europe. We have classified this as the so-called “tail risk”. It is not the risk we view as the most likely one, at least not for now. However, we do see it as a serious, non-trivial one at a time when the risk of a military conflict over one of the world’s most populous regions has increased exponentially.
What This Means for Muslim Investors
Energy Holdings and Commodity Exposure
For Muslim investors there are added complexities. Energy sector stocks in unrelated producing countries such as the US, Brazil or Guyana where new fields are coming on line, may have benefitted from recent price increases. In contrast, Gulf markets which include oil producing companies have, despite higher oil prices, underperformed. This is due primarily to the impact on the export infrastructure from the damage caused by recent disturbances, and a risk premium from heightened geopolitical tensions.
For the gold investor, the conflict has served to confirm gold’s position as the safe haven metal. Spot prices for gold have risen as oil soared in wake of the bombing of bases in Iraq, as expectations of higher inflation and flight to safety both driven by the conflict dynamics push up the price of the metal. For the Muslim investor, this is another illustration of the role gold assumes as a safe and stable store of value in the context of Islamic investment, and in the wake of this conflict in particular.
Shariah-Compliant Portfolios: A Structural Advantage
What the Muslim investors do not dare to say openly in this critical time is that Shariah portfolios do not have any banking paper, interest sensitive bonds and over-leveraged instruments in their investment book. But as interest rates are going to remain high for a longer period and we are having supply side inflation, this characteristic is a blessing in disguise for the Shariah portfolios as conventional portfolios are not.
The sectors which are currently exempt from screening under Islamic laws i.e. leveraged financial services and debt intensive consumer oriented businesses could be the biggest losers in a prolonged energy shock. On the other hand, the sectors that Shariah compliant portfolios currently hold i.e. technology, healthcare, consumer staples and debt free balanced sheet infrastructure could be the biggest gainers, although not bullet proof.
Practical Steps for the Current Environment
Financial advisors across the major institutions are taking a similar view of how to manage through the volatility in the market. They are recommending that investors use the market’s recent advances to rebalance their portfolios rather than make rash decisions near the bottom of the market. They are also advising clients to reduce their exposure to geographies and industry segments that are most sensitive to long-term high energy costs. Finally, many are advocating the addition of some defensive positions in a variety of assets that perform well during periods of inflation as well as in situations in which there is a disruption to the supply chain, such as commodities and infrastructure.
Volatility also creates a unique consideration for Muslim investors. Is this a year for a lower zakat liability? If your zakat anniversary falls at a time when markets are in turmoil, the value of your assets may be depressed at the time that you calculate your obligation. Zakat is calculated as a percent of what you hold on the anniversary of your zakat date, not what the market value of those assets might be at a higher point in the year. Depending on when your zakat date falls in any given year, market volatility could save you a pretty penny. However, as with any other investment consideration, this is not something that you should try to use to your strategic advantage.
It's interesting to step back and think about how conflicts, particularly larger ones, change society in the long run. Often, the immediate outcome may not fully reflect the broader transformation that occurs over time.
The Longer View: What Conflicts Like This Change Permanently
But even major disruptions don’t simply revert to the status quo. The 1973-1974 oil price shock that led to a Middle East oil embargo didn’t just mean higher oil prices for a few months and then return to business as usual. It forever changed the trajectory of the world by rapidly accelerating efficiency improvements and investments in alternative energy sources. The 2022 Russia-Ukraine conflict and its subsequent shuffle of European energy infrastructure and the global trade in LNG will have similarly lasting impacts. Even the 2026 Iran conflict is already having a profound impact on the world’s transition to electric vehicles. “Electricity costs 75 cents to travel 100 miles but gasoline costs $160 for the same distance,” explained one analyst, so the choice between gasoline-powered SUVs and electric vehicles is increasingly a matter of budget, not environmental philosophy.
Long-term Muslim investors are increasingly noticing that the shift to renewable energy away from oil and gas provides an attractive investment opportunity. A number of industry segments such as clean energy, innovative water solutions and sustainable agriculture are also where the idea of Shariah compliance and a long-term investment thesis are increasingly converging.
Final Thoughts
When the news of war between Israel and Hamas flashed across screens, Muslim investors worldwide couldn’t help but worry about the suffering of the people involved. Yet, at the same time, they must also be thoughtful of their role as guardians of other people’s assets and fulfill their religious obligations with the wealth they control. Islam recognizes the management of wealth as an act of worship and prohibits its use for harm or abusive ends.
My advice at this time would be the same as my advice during calm days. Diversification is key, resist any urge to sell in a panic, continue paying zakat as and when due irrespective of stock market value and be long term in approach.
May Allah make it easy for all those affected by the conflict and wise for all those trying to recover from it. — آمين
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Nusrat Ahmed
Nusrat Ahmed