Developments in Iran - Follow up

Following our recent update on developments in Iran, we wanted to provide a brief update on how markets have reacted over the past few days and what this may mean for investors.

The key message remains unchanged: there is no need for investors to panic.

However, recent developments in energy markets and political commentary have influenced short-term market movements.

Oil prices and market volatility

As expected, the main economic channel through which the conflict has affected markets has been oil prices.

Earlier this week, oil prices surged sharply as investors became concerned that the conflict could disrupt supply routes in the Middle East, particularly the Strait of Hormuz, one of the world’s most important energy shipping routes. Prices briefly spiked to levels not seen in several years as markets priced in the possibility of a prolonged supply disruption.

This triggered the type of market behaviour we often see during geopolitical events:

• Increased volatility in equity markets

• Short-term declines in risk assets

• A rapid rise in energy prices

However, markets have since partially stabilised.

Comments from President Trump

Overnight, markets reacted positively to comments from Donald Trump suggesting that the conflict with Iran could be resolved sooner than initially feared.

The President stated that the military objectives were largely complete and suggested the situation may be brought to an end “very soon”. These remarks helped calm immediate fears of a prolonged disruption to global oil supply.

Oil prices subsequently fell sharply from their recent highs, and equity markets recovered some of their earlier losses as investors reassessed the potential economic impact.

At the same time, it is worth noting that messaging from political leaders has been somewhat mixed, with continued warnings that any attempt by Iran to block oil shipments would be met with a strong response. As a result, markets are likely to remain sensitive to headlines in the coming days.

Why volatility is still likely

Even with signs of possible de-escalation, geopolitical situations rarely resolve quickly or predictably.

For markets, the key variable remains energy supply. Oil prices are still meaningfully higher than they were prior to the conflict, which means investors may continue to see fluctuations in markets as new information emerges.

This does not necessarily signal a lasting shift in the global economic outlook. Rather, it reflects the market’s process of constantly adjusting expectations as events unfold.

What this means for investors

For long-term investors, the most important point remains the same.

Well-diversified portfolios are designed with the expectation that periods of geopolitical uncertainty will occur from time to time. While short-term volatility can feel uncomfortable, reacting to headlines often leads investors to make decisions that are not aligned with their long-term financial plans.

History consistently shows that markets recover from geopolitical shocks over time.

The disciplined approach during these periods is typically the most effective one: remain focused on long-term goals and avoid making reactive decisions based on short-term news flow.

In summary

• The conflict has caused short-term volatility in global markets.

• Oil prices remain the key economic transmission mechanism.

• Recent comments from President Trump have helped ease immediate concerns about prolonged supply disruption.

• Markets may remain volatile as events continue to evolve.

• For long-term investors, there remains no need to panic.

As always, if you have any questions about your portfolio or financial plan, please do not hesitate to contact your adviser.