As Operation Epic Fury reshapes the Middle East, Alicia Garcia Herrera warns that the line between temporary shock and structural rupture is dangerously thin
BY TENGKU NOOR SHAMSIAH TENGKU ABDULLAH
KUALA LUMPUR, Mar 2 – The events of February 28, 2026 mark one of the most consequential geopolitical ruptures of the decade.
When US and Israeli forces launched coordinated strikes on Tehran under Operation Epic Fury, killing Supreme Leader Ayatollah Ali Khamenei, closing the Strait of Hormuz and disrupting regional aviation, the Middle East crossed a threshold that had long been feared but narrowly avoided.
What remains uncertain is whether this is a severe but temporary market shock — or the beginning of a structural break in the global economic order.
To assess what lies ahead for oil markets, inflation, central banks and global growth, TNS News spoke exclusively with Alicia Garcia Herrera, Chief Economist for Asia Pacific at Natixis, one of the region’s most respected voices on geopolitical macroeconomics.
Temporary Shock — For Now
Garcia Herrera’s initial assessment is measured rather than alarmist.
“At this early stage, it appears more as a severe temporary shock — driven by acute geopolitical risk and potential oil supply disruptions — rather than a fundamental structural shift,” she told TNS News.
Markets, she noted, tend to overshoot in moments of extreme uncertainty.
“Markets hate uncertainty, but historical precedents — for example, past Gulf tensions — show recovery once escalation risks subside, unless it triggers prolonged regime change or broader regional war.”
For the conflict to become a true structural turning point, something deeper would need to happen.
“A structural turning point would require sustained fragmentation or a decisive change in global energy and security architecture, which isn’t yet evident.”
The distinction matters: a shock can unwind. A structural rupture rewrites rules.
The Strait of Hormuz: The Real Fault Line
If there is one variable that could tip the balance, it is the Strait of Hormuz.
Roughly 20 percent of global oil trade and a fifth of liquefied natural gas shipments pass through the narrow waterway. Even limited disruption carries disproportionate consequences.
Garcia Herrera did not understate the risk.
“Even partial disruptions — mines, threats, or tanker avoidance — could push Brent crude well above $100 per barrel from recent levels of around $70 to $73, with spikes to $120 and above possible in a prolonged closure.”
Such levels would immediately complicate global disinflation efforts.
“This would fuel imported inflation globally — especially in energy-importing economies — complicate disinflation efforts, and force central banks, including the Fed and ECB, to weigh tighter policy against growth risks, potentially delaying rate cuts or prompting hikes if inflation surges persistently.”
The policy dilemma would be acute: contain inflation, or protect growth.
Fragmentation Accelerated
Beyond oil, Garcia Herrera sees the conflict as a potential accelerant of trends already reshaping global trade.
“Yes, it could accelerate it further.”
Energy security concerns, she said, would intensify diversification away from Middle Eastern dependency — pushing greater reliance on US and Latin American shale, as well as accelerating investment in renewables.
Combined with US-China strategic rivalry, this reinforces a shift from efficiency to resilience.
“It reinforces ‘friend-shoring’ and resilience over pure efficiency in value chains — already a trend post-COVID and Ukraine.”
In other words, fragmentation was underway. This crisis could speed it up.
China’s Delicate Energy Arithmetic
China occupies a uniquely exposed position.
As Iran’s largest oil buyer, Beijing faces rising import costs if flows are disrupted. But the geopolitical dimension adds complexity.
Garcia Herrera outlined the dual nature of China’s exposure.
“China faces mixed impacts. As Iran’s top oil buyer, disruptions could raise its import costs and force sourcing from pricier alternatives — such as Russia and Saudi Arabia — hurting margins amid its recovery challenges.”
At the same time, Beijing could attempt to expand diplomatic influence in the region.
“Strategically, it might gain leverage — for example, by mediating or boosting influence in the region — but risks secondary US sanctions or trade frictions if seen as supporting Iran.”
Her overall assessment is cautious; “Higher energy prices add headwinds to China’s growth, though its domestic focus and reserves provide some buffer.”
The Worst-Case Scenario
When asked to identify the single greatest economic risk if escalation continues, Garcia Herrera’s answer was unambiguous:
“A sustained disruption or effective closure of the Strait of Hormuz, leading to a prolonged oil price shock in the $100 to $150-plus per barrel range and potential global recession.”
The transmission channels would be simultaneous and reinforcing:
“This would hit growth hard — via energy inflation, reduced consumer spending, supply chain chaos — test financial stability, for example through emerging market debt strains, and risk drawing in more actors, including proxies and Gulf states, amplifying uncertainty and investment pullback far beyond energy markets.”
The arithmetic supports her warning. Around 20 million barrels of crude move daily through Hormuz. Alternative bypass capacity from Saudi Arabia and the UAE covers only a fraction of normal flows. Investment banks estimate that a full blockade could push Brent into the $120–$130 range.
A prolonged closure would not be absorbed easily by a trade-dependent global economy.
What It Means for Southeast Asia
For Southeast Asia, and Malaysia in particular, the implications are complex.
Malaysia straddles a dual identity: an energy exporter on paper, but a deeply trade-integrated economy vulnerable to global slowdown. Meanwhile, the Strait of Malacca — carrying roughly 16 million barrels daily toward East Asia — is the downstream artery of a system whose upstream source now faces existential disruption.
If oil surges and global trade slows, export-oriented Asian economies would face tightening external demand, imported inflation and volatile capital flows simultaneously.
Shock — or Something Larger?
The events of February 28 did not emerge from a vacuum. They are the product of accumulated strategic mistrust, failed diplomacy and escalating brinkmanship.
Whether this war remains a violent but contained shock — or evolves into a structural reordering of energy and security systems — depends on decisions made in Tehran, Washington, Beijing and Riyadh in the days ahead.
Garcia Herrera’s assessment is sobering precisely because it is restrained.
The worst outcome is not inevitable. But neither is it implausible.
A structural break in the global economy is not yet evident.
But it is no longer unthinkable.
- TNS NEWS