US and Israeli strikes on Iran over the weekend have lit a powder keg under the Middle East and, if matters are not resolved quickly, could end up wrecking the plans of several European IPO issuers.

Despite a long military build-up, the scale of the bombing campaign has shocked the world, especially when it was revealed that Iran’s supreme leader Ayatollah Ali Khamenei had been killed.

Iran has responded with a barrage of attacks across the Middle East and, perhaps most importantly for equity markets, attacked tankers in the Strait of Hormuz, a key shipping lane for crude oil and liquefied natural gas.

Dealmakers have previously told the ECM Pulse in preparation for this year’s European IPO pipeline that geopolitical shocks, once the scourge of ECM timetables, were largely manageable for IPOs, with investors able to focus on business fundamentals, looking beyond news filled with human tragedy.

There are of course exceptions. The shock of US President Donald Trump’s tariff announcement in April last year was a clear example where political decision-making impacted business profitability and economic health; the market reacted accordingly.

While previous tension between Iran, Israel and the US has been digested quickly by equity investors, not least given the clearly defined aims and quickly realised ceasefire, the events of the weekend could have a far more damaging impact on sentiment, given the possible ramifications for the global economy.

Iran’s efforts to strangle the flow of ships through the Strait of Hormuz is compounded by insurers taking a quick decision to raise premiums, or in some cases cancel polices, for ships travelling through the strait.

The impact of the loss of such a key channel in global energy logistics could cause a new “stagflationary wind” to blow through the global economy, noted former Pimco chief Mohamed El-Erian in his latest blog post on global economics.

Iranian retaliation against US-allied Gulf States could further disrupt energy supply.

There have already been some moves in this direction with Iranian drone attacks on Saudi Arabian oil infrastructure on Monday.

IPO impact

Shockwaves from the Iranian conflict could impact some of Europe’s largest potential IPO candidates, such as Advent and Cinven-backed TK Elevator (TKE), which is in the midst of preparing for a multi-billion-euro listing.

While TKE uses 40,000 suppliers locally across its main markets, limiting the impact of shipping inflation on its supply chains it has a key interest in Saudi Arabia.

TKE is 15% owned by Saudi Arabia’s Alat and has entered a JV to provide escalator solutions across the country as part of the Vision 2030 programme. A larger regional conflict involving further attacks on Saudi Arabia might impact its IPO growth story.

These are the sorts of dynamics that investors must run the rule over on every major European IPO candidate, at a time when they were already dealing with a US tech sell-off and uncertainty around AI’s impact on white collar work – taking some listings out of the next window entirely.

Hold for now, embrace instability

With all this uncertainty raging, it would be eccentric for any European business to attempt an IPO, save for the continent’s pipeline of defence industry listing candidates: Vincorion, the German provider of power systems for the defence industry, was reported by this news service as preparing to launch an IPO in early March.

Fellow German player Gabler – a subsea naval technologies specialist – closes its listing bookbuild this week; it will surely benefit from its salience, just as Czechoslovak Group did when it wrapped up its listing amid Greenland drama in January.

But even in a case where a defence business might benefit from global instability, a pause of a week or two may be prudent to give investors a chance to digest this pivotal moment.

The killing of Khamenei significantly raises the stakes versus other recent geopolitical episodes, potentially limiting Iran’s willingness to enter negotiations and throwing uncertainty on the country’s future leadership.

Yet issuers and their advisors would be foolish to down tools entirely.

The US under the Trump 2.0 has tended to deescalate geopolitical standoffs almost as rapidly as it has escalated them and the president has already evoked his “off-ramps” scenarios, as he sees them.

This crisis could prove similar to other seemingly seismic moments over the last few years that looked terrifying for issuance on the outset, but where the IPO market recovery was quick.

Russia’s invasion of Ukraine in 2022 and Trump’s imposition of global tariffs in his April ‘Liberation Day’ announcement both shut Europe’s IPO market.

Source: Dealogic, European IPO volume by quarter

However, as the dust settled, strong issuance quarters followed, with a boost in sentiment allowing dealmakers to get IPOs across the line.

In this light, a pause for breath looks the smartest approach. It would be just as foolhardy for issuers and their advisors looking at the market today (2 March) to put their pens down in despair as it would to launch an IPO regardless of the disruption.

Indeed, as of around 11:00 GMT, the FTSE 100 is only down 0.93%; the DAX 30 is down 1.64%; the CAC 40 is down 1.59%; the VDAX has climbed 16%, but still to a modest 21.6. These moves are relatively modest in the grand scheme and signal the kind of volatility fatigue we have all become used to.

Issuers need to get their businesses ready to launch IPOs to take advantage of whatever window they can, ideally running an accelerated process that cuts market risk to a minimum.

Living with such profound global uncertainty isn’t easy. But equity capital markets have proven nothing but resilient in the face of global disruption over the past few years.

Issuers must embrace uncertainty and work around it rather than letting it scare them into the bunker.

The advice to sellers is go as soon as you can – who knows what’s round the corner?