Category: Private Equity & Finance

By Mark Hendy | 21 March 2026

I’ve spent twenty years as a CFO across manufacturing, aviation and private equity-backed businesses. I’ve stress-tested balance sheets through 2008, COVID, and the energy spike of 2022. What I’m seeing now is different — not because any single element is unprecedented, but because the combination of factors is genuinely historic.

This isn’t a pundit’s hot take. It’s the analysis I’d put in front of a board if a client asked me: “How bad is this, and what should we do?”

The Immediate Shock: What We’re Actually Dealing With

The current crisis has been described as the largest disruption to energy supply since the 1970s. Brent crude surpassed $100 per barrel on 8 March 2026 for the first time in four years, rising to $126 at its peak — with some recent trading touching $145.

That alone would be significant. The compounding factors make it much worse.

The ongoing military conflict has involved attacks on oil infrastructure in neighbouring countries, including Saudi Arabia, Kuwait and the UAE. The bypassable pipeline capacity offers only partial relief — the IEA estimates that only 3.5 to 5.5 million barrels per day can be redirected through Saudi and Emirati pipelines outside Hormuz, leaving an implied net shortfall of roughly 14.5 to 16.5 million barrels per day if normal transit collapses.

Strategic reserve releases are a temporary analgesic, not a cure — the IEA‘s release of 400 million barrels equals only about 20 days of typical Hormuz flows.

Beyond oil, about 85% of polyethylene exports from the Middle East transit this route, threatening the price of packaging, automotive components and consumer goods. Aluminium from the UAE and fertiliser shipments could also be materially affected. The fertiliser angle is particularly dangerous for food security — it feeds into crop production costs with a 6–12 month lag, meaning price pressure on food in late 2026 and into 2027 regardless of when the strait reopens.

The Global Prognosis: Stagflation Is the Base Case

Coming into this crisis, whether Japan, Europe, the United States or the UK, economies were already running hot. An energy supply shock now threatens to push inflation higher while slowing growth — the textbook definition of stagflation.

Oxford Economics modelled a scenario where global oil prices average $140 a barrel for two months — what they characterise as a “breaking point” — finding it would push the eurozone, the UK and Japan into economic contraction. Given Brent has already touched $145, that scenario is not academic.

The debt dimension compounds everything. Goldman Sachs and UBS analysts have warned that if disruption extends through Q2 2026, global headline inflation could rise by 0.7 to 0.8 percentage points, while global GDP growth faces a drag of up to 0.4 percentage points — effectively erasing the post-2024 global recovery.

That’s the benign case.

Just as inflation was beginning to normalise in late 2025, this energy shock is expected to add 2.5 to 3 percentage points to global CPI, forcing central bankers into a lose-lose choice: hike rates to combat energy-driven inflation and risk a deep recession, or hold and risk entrenching inflation expectations. That is the classic stagflation trap, and no central bank has a clean answer to it.

The UK Specifically: More Exposed Than Most

The UK is more exposed to this shock than headline numbers suggest.

Natural gas prices in Europe and the UK have spiked even more sharply than oil, with Dutch TTF and UK NBP futures having almost doubled following the first strikes on Iran. The UK is heavily dependent on gas for both power generation and heating, and the energy bills cycle means household exposure will manifest rapidly.

NIESR analysis finds that a one-year persistent shock would push UK inflation up by 0.7 percentage points and dampen output growth by 0.2% in 2026. The Bank of England could be forced to raise rates back above 4%, and if the shock persists into 2027, the GDP impact deepens to 0.3% below baseline.

This comes on top of an economy that was already anaemic. The Bank held rates at 3.75% as recently as 19 March, with Governor Bailey acknowledging that the conflict has made the outlook for UK inflation “more uncertain” and forced policymakers to reconsider expected rate cuts.

Sterling is particularly vulnerable. A weaker pound directly feeds imported inflation — oil, food, manufactured goods — in a vicious cycle. The UK has neither the US’s energy self-sufficiency nor Asia’s alternative supply corridor flexibility.

And then there’s the debt. The UK sits on £2.9 trillion of public debt, paying £110 billion per year just to service the interest. The surge in gilt yields on the back of the Iran conflict could cost Chancellor Reeves more than a tenth of her fiscal buffer, with financial market moves since late February having already erased around £3 billion of headroom.

The UK’s fiscal arithmetic is genuinely precarious.

What the UK Middle Class Should Actually Do

This is where I’ll be direct and practical. None of this is regulated financial advice — it is informed analysis from someone who does this professionally.

The middle class is uniquely exposed because most wealth is held in pound-denominated assets — property, pensions, savings — with limited natural hedges.

Energy and Physical Resilience

Lock in energy tariffs wherever possible. Switch to fixed contracts before the next billing cycle catches up with wholesale prices. Those with capital should seriously consider heat pump or solar installation — not primarily for environmental reasons, but as a direct hedge against gas price exposure. This is one of the few ways ordinary households can partially insulate their energy cost base.

Reduce Sterling Cash Exposure

Holding large sums in a savings account earning real negative returns (once inflation is factored in) is a slow-motion loss. The priority is to move surplus sterling into assets that are not purely pound-denominated: dollar-denominated assets (US equities, commodities), physical gold, and for those with appropriate risk tolerance and technical competence, Bitcoin held in self-custody.

Gold and Bitcoin — An Honest Assessment

During the initial conflict phase, gold attracted safe-haven demand but later declined as the US dollar strengthened. Bitcoin experienced volatility but recovered quickly, reflecting its growing role as an alternative asset — though price movements remain closely tied to sentiment and liquidity.

The longer-term structural case for both is strong: gold as a proven multi-millennia store of value in crisis, Bitcoin as a censorship-resistant, seizure-resistant digital alternative for those who understand sovereign default risk.

For the UK middle class, a 5–10% allocation split between physical gold and self-custodied Bitcoin is reasonable as an insurance layer — not a speculation.

Property: It Depends

UK residential property has historically been a reasonable inflation hedge because supply is structurally constrained. However, if rates are forced higher, leveraged property becomes a liability rather than an asset. Those on variable rates or coming off fixed-rate deals need to stress-test against a scenario where rates return to 5–6%.

Outright owners in real assets are better positioned than leveraged buyers.

Equities: Sector Matters Enormously

Energy companies, defence contractors, UK-listed commodity producers and mining stocks are direct beneficiaries of this environment. Consumer discretionary, highly leveraged businesses and anything dependent on cheap imported inputs are exposed.

ISA investors should review whether passive index trackers — heavily weighted towards rate-sensitive sectors — are appropriate right now.

Food and Supply Chain Resilience

For many commodities transiting the Strait, inventories typically cover only a few weeks. Shortages could emerge relatively quickly if disruptions persist. The fertiliser disruption matters particularly for food prices in 6–12 months.

Practically: stocking a few months of staple supplies is rational, not paranoid. Buying long-shelf-life goods now, before food inflation fully filters through, is simply sensible household financial management.

Debt Management

If you carry variable-rate consumer debt or are exposed to rate rises on a mortgage, prioritise paying it down. In a stagflationary environment, the combination of rising debt service costs and stagnant or falling real wages is deeply destructive to middle-class wealth.

Fixed-rate, long-duration debt is defensible. Floating-rate exposure is not.

The Uncomfortable Bottom Line

The world has entered a period of genuine instability not seen since the 1970s — and arguably more complex because of the debt overhang that 2008 and COVID baked in. The 1973 oil embargo triggered a decade of economic dislocation, reset political landscapes and produced a fundamental restructuring of energy policy across every major economy.

The current crisis has not yet reached those proportions — but the structural conditions for a similar reckoning are present in a way they have not been for fifty years.

Fiat currencies across the developed world are under structural pressure regardless of this crisis — the crisis simply accelerates the timeline. The UK, with its high debt-to-GDP ratio, energy import dependency and limited fiscal headroom, is among the more exposed major economies.

The middle class — holding wealth in sterling, in pension funds weighted towards domestic bonds, and in leveraged property — are those with the least natural protection.

The moves available are not dramatic or exotic. They are methodical: reduce sterling cash drag, build real-asset exposure, stress-test debt, hedge living costs through energy and food preparation, and ensure that some portion of wealth exists outside the banking system entirely.

None of that requires being catastrophist. It just requires treating the risk as real — which it plainly is.

Mark Hendy is an interim CFO specialising in PE-backed mid-market businesses. He has held finance leadership roles across manufacturing, aviation, automotive and agriculture. Views expressed are personal and do not constitute financial advice. For professional guidance, consult a regulated financial adviser.

Get in touch if you’d like to discuss how your business should be preparing for what’s ahead.