When we put together The Alta Group’s 2026 Insights, we called out several headwinds that could impact the outlook for equipment finance. Two of those wildcards were geopolitical shocks and the possibility of stagflation. We pointed to the Middle East where “multiple conflicts threaten to re-emerge in 2026.” Were we clairvoyant – not that much, as the seeds of unrest were obvious to even casual observers.
We also suggested that stagflation risk remained given the then macroeconomic pattern: inflation proving stubbornly persistent, interest rates remaining elevated even though there was talk of rate cuts, and unemployment numbers potentially softening. That combination—sticky inflation alongside slowing growth—has historically created the conditions for stagflation.
The question is no longer whether these risks exist. The question is how markets and lenders respond if they begin to converge.
In fact, the possibility is now beginning to enter mainstream policy discussion. Following the Federal Reserve’s March meeting, Chair Jerome Powell acknowledged the growing uncertainty in the outlook, noting that the Fed’s projections now reflect slower growth alongside still-elevated inflation. While he stopped short of predicting stagflation, the overlap of weakening growth and persistent inflation is precisely the dynamic that has historically raised those concerns.
We’re not saying that stagflation is inevitable. But we’re pointing out that several of the economic ingredients historically associated with it are beginning to align. History shows that stagflation rarely arrives with a single dramatic event. More often, it emerges gradually—when geopolitical shocks, supply disruptions, and persistent inflation begin reinforcing one another.
What is striking now is that the current conflict involving Iran is merging these two headwinds. The escalating tensions surrounding Iran have raised the possibility of a supply-driven stagflation shock, particularly if disruptions to Middle East energy flows persist. Markets are watching closely because the Strait of Hormuz, one of the world’s most critical energy shipping corridors, typically carries roughly one-fifth of global oil supply. Even partial disruptions can quickly ripple through transportation, manufacturing, and consumer prices worldwide, particularly at a time when demand for electrical power generation is forecast to accelerate rapidly.
Major market commentators are increasingly framing the risk in these terms. Analysts at BlackRock warn that energy disruptions could trigger a “stagflationary supply shock,” while strategists at JPMorgan Chase note that energy shocks are uniquely challenging for policymakers because they are both inflationary and recessionary at the same time. Higher oil prices push inflation higher directly, while also slowing economic activity by eroding consumer purchasing power and raising operating costs for businesses.
At this stage, credit rating agencies and leading market analysts are viewing the situation as heightened risk rather than an imminent credit crisis. A global credit event hinges on three factors: the duration of the conflict, whether the Strait of Hormuz remains disrupted, and the trajectory of oil prices. If all of those remain contained, the credit impact is likely short-term volatility rather than systemic stress. But if oil supply is disrupted for weeks or months, the result could be global inflation, slower growth, and tighter credit markets.
Meanwhile, the capital markets are already showing early signs of defensive positioning. Investors have increased allocations to traditional safe-haven assets such as government bonds, while hedging activity through credit derivatives has risen and equity markets have become more volatile. Interestingly, gold—which often rallies during periods of geopolitical stress—has recently pulled back from its highs. Rather than undermining the risk narrative, that move may reflect markets adjusting to the possibility that persistent inflation could keep interest rates higher for longer, a dynamic that can temporarily weigh on non-yielding assets like gold. Credit spreads have widened modestly, but the broader financial system remains stable. Much will depend on whether energy disruptions prove temporary or persist long enough to keep oil prices elevated for months rather than weeks.
Industry sentiment is also beginning to reflect this growing uncertainty. The latest Monthly Confidence Index from the Equipment Leasing and Finance Association showed a modest decline in executive confidence in March, with a growing share of industry leaders expecting business conditions to soften in the months ahead. While far from signaling distress, the shift suggests equipment finance executives are increasingly factoring macroeconomic volatility into their outlook.
Some lenders are also warning that energy-driven shocks could quickly ripple into financing markets. One U.S. equipment finance provider recently cautioned that a sustained oil price spike tied to Middle East tensions could tighten credit conditions and increase equipment costs—echoing the dynamics seen during previous energy shocks. Taken together, these signals reinforce a broader point: the risks highlighted earlier in the year are beginning to move from theoretical discussion into practical planning considerations for industry leaders.
For equipment finance executives, the message is straightforward: the stagflation risk we flagged earlier in the year may now be reinforced by geopolitics—making disciplined credit underwriting, sector diversification, and funding resilience more important than at any time in recent cycles.