How the Strait of Hormuz Crisis Is Reshaping Deal Timelines and Valuations

The escalation of conflict in the Middle East has effectively closed the Strait of Hormuz, one of the world's most critical energy chokepoints, and the effects are reverberating across global markets. WTI crude oil prices briefly spiked above $119 per barrel before settling below $100, the Dow Jones Industrial Average is down more than 5% month-to-date (its worst stretch since 2022), and the Federal Reserve held rates steady at 3.5% to 3.75% on March 19, signaling that rate cuts are unlikely before the fall. For business owners in the middle of a transaction, or considering one, these developments carry real consequences.

Energy Prices and the Cost of Doing Business

When oil prices spike, the impact extends well beyond the gas pump. Businesses across manufacturing, logistics, food services, and retail face rising input costs that compress margins. For companies in the middle of a sale process, this creates an immediate challenge: trailing twelve-month financials may no longer reflect the cost environment a buyer is underwriting.

Sellers who can demonstrate that their pricing power and supply contracts insulate them from commodity volatility will be in a stronger position. Buyers, meanwhile, are running updated sensitivity analyses on every deal in their pipeline, stress-testing assumptions around energy costs, freight rates, and raw material pricing.

What the Fed's Decision Means for Deal Financing

The Federal Reserve's decision to hold rates steady was widely expected, but the forward guidance matters more than the hold itself. Futures markets now suggest that the next rate cut may not come until September or October, and even then, only a single reduction is priced in. That means the cost of debt financing for leveraged buyouts and acquisitions will remain elevated through at least the third quarter.

For sellers, this creates a practical reality: buyers who rely heavily on leverage may offer lower prices to maintain their return thresholds, or they may push for more creative deal structures (earnouts, seller financing, deferred consideration) to bridge the gap. For buyers with strong balance sheets or access to private credit, the current environment may actually present an advantage, as leveraged competitors pull back.

The Equity Market Selloff and Valuation Multiples

The Dow's decline below its 200-day moving average and the broader equity selloff are putting downward pressure on public market valuations. When public company multiples contract, private company valuations tend to follow, though with a lag of several weeks to a few months. Business owners considering a sale in the next two to three quarters should be aware that comparable transaction multiples may soften if the current volatility persists.

That said, context matters. The selloff is concentrated in sectors most exposed to energy costs and geopolitical risk. Technology, healthcare services, and business services have held up better than industrials and consumer discretionary. Companies in more resilient sectors may find that their valuations are less affected than the headline numbers suggest.

Deal Timelines Are Stretching

One of the less visible but practically significant consequences of geopolitical uncertainty is its effect on deal timelines. Buyers become more cautious in their diligence process, lenders take longer to commit to financing terms, and boards may delay approval of transactions until the situation clarifies.

For sellers who are mid-process, this means preparing for the possibility that closing dates may shift. It also means ensuring that your deal team is proactive in addressing buyer concerns, whether that involves updated financial projections, scenario analyses around commodity exposure, or revised working capital assumptions.

Looking Ahead: Three Trends to Watch

First, the duration of the Strait of Hormuz disruption will determine whether the current market stress is a temporary shock or a sustained repricing of risk. If the conflict extends into Q2, expect a more meaningful impact on deal volumes and valuations.

Second, the private credit market is becoming increasingly important as traditional bank lending tightens. Some major private credit players faced selling pressure this week, but the structural shift toward private credit as a financing source for middle market transactions continues.

Third, sector rotation is accelerating. Energy, utilities, and consumer staples are outperforming, while growth-oriented sectors face headwinds. Business owners in defensive sectors may find that buyer interest actually increases during periods of uncertainty, as acquirers seek stable cash flows.