The Iran Conflict and What It Means for Infrastructure Finance, Energy Security, and the Emerging Market Capital Stack

Let me be direct about what is happening and what it means for the infrastructure finance markets we operate in.

On February 28, the United States and Israel launched coordinated strikes against Iranian nuclear facilities, military command infrastructure, and senior regime leadership. Iran responded by closing the Strait of Hormuz and launching retaliatory strikes against US bases, Israeli targets, and military and civilian installations across Gulf states hosting American forces. Brent crude moved into the high $70s. European natural gas prices surged over 20% overnight. Maritime war-risk insurance premiums for the Persian Gulf are up 50% and climbing. Tanker traffic through Hormuz — the chokepoint for roughly 20% of global oil and a significant share of LNG — has dropped to near zero.

This is not a drill. And for those of us who structure, finance, and advise on infrastructure transactions across the Middle East, Africa, and South Asia, the implications are immediate, material, and in several cases permanent.

What the Market Is Getting Right — and Wrong

Markets are pricing this as a short conflict. Oil moved 10%, not 40%. That tells you the consensus view is that Hormuz reopens within weeks, Iranian retaliation remains contained, and Gulf state oil infrastructure survives largely intact. The oversupplied global oil market, strategic petroleum reserves, and Saudi pre-positioned inventory are providing a buffer.

That consensus may prove correct. But I would not bet my capital stack on it.

The scenarios that should concern infrastructure sponsors and capital allocators are not the base case. They are the tail risks: a sustained Hormuz closure lasting beyond four weeks, escalation into direct conflict with Gulf state energy infrastructure, or an Iranian campaign of asymmetric strikes against shipping lanes and port facilities across the Arabian Sea and Red Sea corridor. Any of these scenarios reprices the entire risk architecture of infrastructure project finance in the region.

Five Channels of Transmission to Infrastructure Finance

Here is how this conflict transmits into the infrastructure deals we work on every day.

Energy input costs are repricing every active project model. Every infrastructure project with significant energy input costs — desalination plants, industrial parks, mining operations, cement and steel production — is seeing its financial model stressed in real time. A sustained move in Brent above $90 breaks the economics of projects that were structured at $70-75 assumptions. For energy-importing emerging markets — Pakistan, Bangladesh, Thailand, the Philippines, Kenya, Tanzania — higher LNG and crude costs directly compress the fiscal space available for infrastructure co-investment and sovereign guarantee capacity.

Marine war-risk insurance is repricing Gulf and Indian Ocean logistics. Maritime insurance premiums for the Persian Gulf have increased 50% since February 28, with major underwriters issuing cancellation notices for war-risk coverage. This directly impacts the cost structure of any infrastructure project dependent on Gulf-origin equipment delivery, construction materials, or commodity throughput. Port and maritime infrastructure projects across the Arabian Sea corridor — from Gwadar to Mombasa — face materially higher insurance and freight costs that were not contemplated in their original project finance structures.

Sovereign risk profiles are diverging fast. The conflict is creating a two-speed dynamic in emerging market sovereign risk. Gulf states with large fiscal reserves and energy export revenues (Saudi Arabia, UAE, Qatar) will absorb the near-term shock, though their infrastructure programs face execution delays from supply chain disruptions. Energy-importing emerging markets with tight fiscal positions — Egypt, Jordan, Pakistan, Sri Lanka, Kenya — face a simultaneous hit: higher energy import bills, currency pressure from capital outflows, and reduced fiscal capacity to support infrastructure PPP programs. Credit default swap spreads for these sovereigns are widening meaningfully. For infrastructure sponsors with active mandates in these markets, the sovereign guarantee that underpins your concession agreement just got less reliable.

ECA and DFI risk appetite is tightening. Export credit agencies and development finance institutions were already cautious on Middle East and East Africa exposure following the Red Sea shipping disruptions of 2024-25. The Iran conflict accelerates this trend. Sinosure, JBIC, K-Sure, and the major European ECAs will all be reassessing country-risk classifications for the broader MENA and Indian Ocean rim. Expect longer approval timelines, higher premium rates, and more restrictive cover terms for infrastructure projects in conflict-adjacent geographies. DFIs including IFC and ADB will likely increase their political risk insurance requirements for new commitments in the region.

Saudi Vision 2030 execution faces a new risk vector. Saudi Arabia's $1.3 trillion infrastructure pipeline — NEOM, the Red Sea Project, Diriyah Gate, Rig, and the broader giga-project portfolio — was already facing execution challenges from contractor capacity constraints and supply chain bottlenecks. The Iran conflict introduces a direct security risk to the program. Iranian retaliatory strikes have targeted facilities in Gulf states hosting US forces. While Saudi critical infrastructure has not been directly hit as of this writing, the risk premium for construction contractors, equipment suppliers, and project finance lenders working on Saudi giga-projects has permanently increased. Insurance, contractor mobilisation costs, and force majeure provisions will all need to be renegotiated.

What Smart Sponsors Should Be Doing Right Now

In a conflict environment, the difference between sponsors who protect value and those who destroy it comes down to speed of response and quality of structuring. Here is what we are advising our clients.

Stress-test every active project model at $95 and $110 Brent. If your project does not work at $95, you have a problem today. If it does not work at $110, you have a contingency planning exercise that needs to start this week. Do not wait for the base case to prove wrong.
Review force majeure and material adverse change provisions. Every concession agreement, EPC contract, and financing agreement in the affected region should be reviewed for force majeure triggers, material adverse change definitions, and termination provisions. The time to understand your contractual position is now — not when a counterparty invokes a clause against you.
Accelerate ECA and insurance renewals. If you have ECA cover or political risk insurance that renews in the next 90 days, engage your broker immediately. Coverage terms available today will not be available in three weeks if this conflict escalates. Lock in what you can.
Reassess supply chain routing. Projects dependent on equipment or materials transiting the Strait of Hormuz or the broader Arabian Sea corridor need alternative logistics plans. The Cape of Good Hope route adds 10-14 days and meaningful cost, but it is available. Identify alternative sourcing for critical path items.
Engage your sovereign counterparty. If your project depends on a sovereign guarantee, off-take agreement, or government concession in an energy-importing emerging market, now is the time to assess the government's fiscal resilience. Do not assume that commitments made in a $70 oil environment hold in a $95 oil environment.

The Structural Shift: Energy Security as Infrastructure Priority

Beyond the immediate crisis, the Iran conflict accelerates a structural shift that was already underway. Energy security is being elevated from a policy aspiration to a first-order infrastructure investment priority across the emerging world.

Countries that were debating the pace of renewable energy deployment are now viewing solar, wind, battery storage, and distributed generation as national security imperatives. The economics already favoured renewables in most emerging markets. The geopolitics now make the case overwhelming. Expect accelerated procurement timelines for renewable energy IPPs across South Asia, East Africa, and Southeast Asia — not because the climate case got stronger, but because governments that depend on Gulf-origin hydrocarbons just watched their energy supply get weaponised.

For infrastructure sponsors and capital allocators, this is the durable investment thesis that emerges from the current crisis. The projects that will attract the most capital over the next 24 months are those that reduce emerging market dependence on hydrocarbon imports transiting conflict-exposed chokepoints. Renewable energy, energy storage, grid modernisation, LNG import diversification, and strategic petroleum reserve infrastructure will all see increased deal flow and political support.

The Bottom Line

We have operated through conflicts before. The Russia-Ukraine war, the Red Sea crisis, and multiple episodes of Gulf tension have all tested the resilience of infrastructure finance structures in emerging markets. This one is different in scale and in the directness of its impact on the energy supply chain that underpins project economics across three continents.

The sponsors and advisors who navigate this well will be those who move fast, stress-test ruthlessly, and structure for the world as it is — not as they wish it were. The infrastructure opportunity in the emerging world has not diminished. But the risk architecture around it has fundamentally changed, and our structuring must change with it.