Rising Tensions in Iran: Market Update

Over the past week, geopolitical tensions between the U.S., Israel and Iran have continued to escalate. The U.S. and Israel have launched further waves of airstrikes across Iran, targeting a number of strategic sites including oil depots and other infrastructure. Iran has responded with continued missile and drone strikes targeting U.S. and allied assets across the region.

Political developments have also added to uncertainty. Iran has named Ayatollah Mojtaba Khamenei as successor to his father, Ayatollah Ali Khamenei, while military activity across the region has remained elevated. Most significantly for markets, the Strait of Hormuz has effectively come to a standstill, with only Iran-linked vessels currently able to pass through the key shipping route. Gulf states have begun cutting oil production as a result.

As events continue to unfold, markets have been reacting primarily through energy prices and broader risk sentiment.

Market moves so far

The most significant move has been in oil markets. Brent crude rose sharply to around US$110 per barrel on Monday before retreating to roughly US$90. The pullback followed comments from Donald Trump suggesting the conflict could be resolved “very soon” and that he would waive oil-related sanctions. Nevertheless, the earlier spike highlights how sensitive oil prices are to concerns around potential disruption to global supply, particularly given the central role of the Strait of Hormuz in global energy markets.

Equity markets have also declined, although moves have varied across regions. As of Monday, U.S. markets were down around 2.0% month-to-date, while European equities had fallen more noticeably, by around 5.6%. Markets have since recovered somewhat following the comments referenced above, though remain down.

Currency and bond markets have reflected a degree of safe-haven demand. The U.S. dollar has strengthened modestly, while government bond yields (which move inversely to bond prices) have moved higher across major markets. Gold initially rallied above US$5,400 per ounce as investors sought defensive assets, before retreating to around US$5,100 as the stronger U.S. dollar and fading expectations of near-term Federal Reserve rate cuts weighed on prices.

What this means for investors

In our update last week, we noted that the immediate market impact of rising tensions would likely be felt primarily through energy markets and shifts in short-term risk sentiment. The developments since then have broadly followed that pattern, seen by the oil prices rising sharply and equity markets experiencing volatility.

The key uncertainty now lies in how long the disruption persists and whether tensions stabilise or escalate further. If the conflict ultimately settles following an initial period of retaliation and market volatility, markets may treat the episode largely as a temporary geopolitical shock. Encouragingly, over the last 24 hours markets have already shown how willing they are to react positively to good news. In that case, oil prices would likely retrace as fears of sustained supply disruption fade, and the broader macroeconomic impact may remain relatively contained.

However, as the war continues, the risk of more sustained disruption increases, particularly given the current situation in the Strait of Hormuz. Should oil flows remain constrained for an extended period, energy prices could stay elevated in the US$90–110 range or potentially higher. Persistently higher energy costs would place upward pressure on global inflation and could weigh on household spending and corporate margins, while also delaying potential interest rate cuts from central banks.

Our positioning

In periods of heightened geopolitical uncertainty, particularly given the unpredictable nature of President Trump, predicting short-term market outcomes becomes extremely challenging. The past 24 hours illustrate how quickly markets can change, underscoring the importance of avoiding reactive portfolio decisions.

Our focus on diversification means our portfolios are constructed with allocations to defensive assets designed to provide resilience during periods of market stress. This structural positioning allows us to monitor events as they develop and respond if clearer risks or opportunities emerge, rather than reacting to short-term volatility.

While market movements may continue as the situation evolves, maintaining a disciplined approach remains important. We will continue to observe developments closely and provide further updates as the situation progresses.

All information is accurate as of 09:00 GMT on 10 March 2026.