Escalation in Iran: Market Moves and Investor Implications

Over the weekend, geopolitical tensions between Iran, Israel and the US intensified. We saw multiple military operations which targeted Iranian military infrastructure and leadership compounds. Iran has responded with missile and drone attacks against US assets and regional allies. The situation remains fluid, and further developments are ongoing in real time.

In this article, we focus on the market impact and implications for investors.

The Primary Impact: Energy Markets

The main immediate effects of renewed tensions can be seen in energy markets. Iran’s proximity to the Strait of Hormuz makes geopolitical developments there particularly relevant for global energy markets. About 20% of the world’s oil and liquefied natural gas shipments pass through this narrow waterway. Recent attacks and rising security risks have already pushed up shipping costs and insurance premiums. Even without a full closure, the threat of disruption has driven Brent crude, the international benchmark, up roughly 7.5% to around US$80 per barrel, from last week’s US$66–US$72 range.

What Does This Mean for Markets?

While every conflict has its own characteristics, when geopolitical tensions rise, especially in the Middle East, markets often follow familiar patterns as they attempt to “price-in” the balance of investment risks in an environment of uncertainty. Below we explain how key asset classes tend to behave in such environments and where they are trading now.

• Oil prices rise because Iran, in addition to being an oil producer itself, sits near the Strait of Hormuz, which is a key route for global energy and potentially can be blocked by Iran. Any threat to supply, even if temporary, pushes oil prices higher over fear of constrained supply. As explained above, Brent crude, has surged to 8% in early morning trading.

• Gold rallies as it’s considered a safe-haven asset. When uncertainty rises, investors buy gold to protect against risk and market volatility. Gold prices have increased to above US$5,400 per ounce (an increase of around 2.5%), reflecting rising geopolitical risks.

• US Dollar strengthens as it is also seen as a safe, reliable currency during periods of geopolitical uncertainty. The US dollar has risen 0.8% vs. a basket of other currencies, amid heightened demand for US safe-haven assets.

• Equities tend to fall as investors reassess short-term risks to growth and corporate profits. Asian equities initially fell around 0.8% but quickly rebounded to end flat on the day. The initial reaction in European markets has been larger, falling 1.7%, while UK market has fallen 1.0% so far today.US index futures contracts, which is a derivatives market that enables investors to buy the US index at a pre-agreed price, is down around half a percent at time of writing.

• Bonds remain relatively neutral, as the small and mixed moves reflect expectations of limited sustained macro impacts on growth and inflation at the present time. The US Treasury yields (which move inversely to prices) have modestly ticked up by 0.8% today, while the 10-year UK government bond yields have ticked up 0.1%. The bond market appears to be trading off the “safe haven” status of bonds with risks to inflation from higher energy prices, if the higher level of energy prices persists.

Source: WTW. Market data as at time of writing at 9am GMT 2nd March 2026.

What are the implications for investors?

In the short term, we would expect any impacts to be felt mostly through oil markets, inflation sensitive assets, and responses to short-term sentiment, with the market movements in equities and gold consistent with this.

The longer-term impact will depend very much on the duration and resolution of the conflict, and as such is highly uncertain. However, our baseline view is that the military conflict between the US and Iran is likely to be short-lived i.e. weeks rather than months. If this is the case, there is no change in our market outlook, which remains constructive on equities and global markets for the year ahead. To read more about how we assess the long term influence of geopolitics on investment returns, see here.

Markets and investors have faced wars and conflicts before, and experience suggests they can rally as quickly on the resolution of risks as they can fall in response to uncertainty. For long-term investors, this reinforces the importance of staying invested and maintaining a disciplined approach, rather than reacting to short-term volatility.

We will continue to monitor developments closely, if you have any questions, please get in touch with your atomos contact.