Global tensions test the mood at MIPIM

Spare a thought for the organisers of MIPIM’s fireside chats and roundtables. Once again, global events are forcing a rewrite of the conference script.

In 2020, the pandemic forced a postponement. In 2022 Russia invaded Ukraine. Delegates arrived in Cannes today with oil well above US$100 and bond markets selling off on fears the energy shock will add to inflation pressures. 

Glancing at headlines while traversing the Croisette will bring on a sense of unease; key asset prices are seeing their biggest monthly swings since previous crises as investors try to price a wide range of possible outcomes. Swaps traders now ascribe a roughly 70% chance of a quarter-point rise in the UK base rate from 3.75% before the end of the year. 

Consensus among economists and central bankers is more measured. Energy prices are expected to weigh on growth, but to a manageable degree, and central banks may pause or slow their easing cycles rather than reverse them. In commercial real estate, provided markets continue to believe the impact of the conflict will prove temporary, the effect on property yields should be limited. 

Non-trivial

Oil prices jumped to as high as US$119 a barrel this morning, the highest since 2022, before paring gains to around US$107 when the FT reported that G7 ministers will discuss a possible joint release of petroleum from reserves co-ordinated by the International Energy Agency.

Economists at the UK’s National Institute of Economic and Social Research estimate that if oil were to average US$100 per barrel for a year, inflation would run about 0.7 percentage points higher than currently expected – roughly 3.2% instead of 2.5% – while growth would be around 0.2 percentage points lower, at about 0.8%. These are "non-trivial, but manageable," Deloitte chief economist Ian Stewart wrote in a note to clients this morning. 

Stewart points out that energy markets are more efficient, integrated and contestable than they were in the 1970s, when the IEA reserves were set up following the Arab oil embargo. Back then, about 60% of the global oil supply went through the Strait of Hormuz. Today it accounts for 20%.

That's in part why financial markets are not pricing sustained economic disruption. Futures markets show oil prices easing next month and beyond, Stewart points out. The decline in the UK equity market, with the FTSE 100 index down 6% from its 27 February peak, "is not suggestive of a material downturn in corporate prospects," he adds. "But as long as the conflict continues, the risk of serious economic damage grows."

Safe havens

In real estate markets, the uncertainty will fuel hesitancy which may weigh on volumes. The Middle East may see capital outflows into safe havens such as London, which could help offset the hit to sentiment.

Rises in risk-free rates do threaten to put upward pressure on yields, given the current narrow spread between property yields and the ten-year gilt. 

That said, the ten-year gilt stood at 4.704% this morning, taking yields back only to levels seen last October. The base case at consultancy Capital Economics remains that the Bank of England may only cut to 3.25% by the end of 2026, rather than the 3% it previously forecast.

In a note on Friday, senior commercial real estate economist Matthew Pointon pointed out that, following the invasion of Ukraine, property yields continued to decline even as the 10-year yield rose. It wasn't until the mini-budget debacle sent government borrowing costs sharply higher that property yields reacted.

"We therefore doubt the Middle East conflict represents a large risk to the UK commercial property market," Pointon added. "That is in line with the view of equity investors, with the NAREIT index dropping 5.5% since the start of the conflict, in line with the overall equity market. And that implies all-property capital value growth of around 3% to 4% y/y over the next few months. For now, therefore, we are not changing our forecasts, with the conflict currently representing a small downside risk to returns."

Capital inflows

The FT had an interesting interview with European Central Bank chief economist Philip Lane on Thursday, in which he pointed reporters to ECB scenario analysis produced in 2023. 

In that exercise, the ECB examined a scenario in which a third of the oil and gas passing through the Strait of Hormuz was disrupted. Economists estimated that oil prices – then around US$80 a barrel – could climb by more than 50% to roughly US$130. Eurozone growth would then be about 0.6 percentage points weaker in the following year, while inflation would rise by more than 0.8 percentage points.

To borrow Ian Stewart's phrase, that would be “non-trivial but manageable.” Investment volumes on the continent have been improving; transaction volumes in Europe (excluding the UK) reached €160 billion in 2025, the highest level since 2022, according to MSCI Real Capital Analytics. Activity accelerated in the second half of the year, supported by a renewed inflow of US capital and marking the strongest H2 performance since 2021. Momentum has carried into 2026, with preliminary inbound investment reaching €5.8 billion so far this year.

For delegates gathering in Cannes this week, that should provide some reassurance. MIPIM has a habit of colliding with moments of geopolitical drama, but the underlying drivers of property markets tend to be more durable. 

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