Markets have not fully priced in the economic fallout from a potential prolonged closure of the Strait of Hormuz, according to Barclays' Themos Fiotakis. Speaking to Bloomberg Television, the firm's global head of FX strategy and emerging markets macro strategy warned that commodity prices and inflation risks remain underpriced if the critical shipping route remains blocked for more than a couple of weeks.

Fiotakis noted that current market valuations fail to account for the cascading effects of sustained supply disruptions through the strait. The Middle East conflict continues to create uncertainty around the waterway that handles roughly 20% of global oil shipments. Higher energy costs would likely ripple through multiple sectors, amplifying inflationary pressures already building in the global economy.

Barclays' assessment suggests investors may be underestimating the duration and severity of potential market dislocations. The analysis comes as geopolitical tensions persist in the region, raising the specter of extended supply chain disruptions. With energy markets particularly sensitive to such developments, the failure to price in worst-case scenarios could leave portfolios vulnerable to sudden price shocks.