The recent conflict involving Iran and escalations across the Gulf region have sent energy prices and financial markets into flux, prompting CRE investors and occupiers to assess potential implications. According to a Cushman & Wakefield report, the most immediate impact is indirect, transmitted through higher energy costs, inflationary pressures and tighter financial conditions rather than direct exposure to geopolitical events.
Energy prices remain the primary impact. Brent crude surged from roughly $60 per barrel to nearly $120 at the height of the conflict so far and is currently fluctuating in the $90–$100 range. Higher oil and gas costs act as a tax on businesses and consumers, raising operating, transportation and development expenses, according to Cushman & Wakefield.
While the U.S. is relatively insulated due to strong domestic production, Europe and parts of Asia remain more exposed, which could influence global economic growth.
Sustained energy price increases could feed into inflation, potentially prompting central banks to keep interest rates higher for longer. Higher borrowing costs may tighten financing conditions, which investors and occupiers closely monitor when planning acquisitions, developments or leasing strategies.
Cushman & Wakefield outlines several potential scenarios. In a baseline case, disruptions to shipping through the Strait of Hormuz prove temporary, allowing oil prices to remain elevated in the near term before gradually easing, with limited impact on financial conditions.
A more favorable scenario sees quick de-escalation, reducing risk premiums and returning markets to more normal levels. In a downside scenario, prolonged disruption keeps oil above $100 per barrel, accelerating inflation, delaying rate cuts, tightening financial conditions and slowing global growth, particularly in Asia and EMEA.
However, the CRE sector has historically remained resilient through geopolitical volatility, as noted in the report. Leasing demand has held steady, and stable income streams often buffer the impact of broader market shocks. Elevated uncertainty tends to prompt more selective capital deployment and wider risk premiums, rather than broad divestment.
Energy-intensive properties may face higher operating and development costs, but unless supply disruptions are prolonged or severe, these increases are unlikely to derail overall demand.
Cushman & Wakefield emphasized that the key variable for investors and occupiers is whether energy prices rise enough to materially influence inflation, interest rates and financial conditions. For now, the evidence suggests that this episode is more likely to affect the timing of investment decisions rather than the longer-term trajectory of real estate demand or space utilization, according to the report.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.