Over the weekend, the United States (US) and Israel carried out coordinated military strikes against multiple targets in Iran, including military infrastructure and regime leadership positions.
Markets opened on Monday with a clear but measured risk-off tone: equities traded lower, oil surged, and safe-haven assets, including gold, the Japanese yen, and the US dollar, saw increased demand.
It is understandable that events of this scale have prompted concern. In times like these, maintaining composure is essential.
History is instructive when considering events such as these. Major geopolitical events, even those involving military action, have typically produced sharp but short-lived market disruptions.
Source: EQ Investors
When Israel and the US struck Iranian nuclear facilities in June 2025, oil spiked and then quickly retraced once it became clear that actual supply disruptions would be limited.
This pattern repeats across decades of geopolitical (and indeed other market-related) events. The initial reaction will tend to overshoot, and the market then generally recovers as uncertainty resolves.
This does not mean complacency is called for, but it does mean that reactive selling at the point of maximum fear has historically been a costly mistake.
The main way this conflict could impact the broader economy is through energy markets. The Strait of Hormuz, a narrow waterway responsible for roughly one-fifth of global oil and liquefied natural gas (LNG) shipments is vital for meeting worldwide energy demand. Tanker traffic through the Strait has been significantly disrupted, driving a sharp increase in oil prices.
This matters because a severe and prolonged energy supply shock could have genuine implications for growth and inflation around the world.
As we often note, periods like this highlight the importance and resilience of a well-diversified portfolio. In recent years, we have placed significant emphasis on building resilience into our portfolios, ensuring they are better positioned and not caught off guard during market events like this.
We are closely monitoring developments, especially for any indications that this event could affect the global economic outlook. At the same time, we remain cautious about making significant portfolio changes. We will keep you informed should that assessment change.
Investors most affected by geopolitical crises are often those who sold during the initial shock and did not reinvest before the recovery. In situations like these, patience and a portfolio designed to withstand uncertainty remains the most dependable strategy.
Any questions?
If you would like more information about EQ’s investment views and services, please get in touch.
Please remember, this content is provided for information purposes only. Investment involves risk. Past performance is not a guarantee or indication of future results. Investment return and the principal value of an investment may go up or down and may result in the loss of the amount originally invested. All investors should seek professional advice prior to any investment decision, to determine the risks associated with the investment and its suitability.
