In the face of the conflict in the Middle East, investment firms are urging investors not to rush and to wait for events to unfold. Their first message is to pay close attention to the duration and scope of the conflict, as these will determine the magnitude and persistence of price movements in commodities, equities, and other risk assets.
For now, they explain that we have seen a rise in oil and gas prices, greater interest in safe-haven assets, and an increase in uncertainty. “Markets are adjusting to higher geopolitical risk, but they are not yet positioning for a prolonged regional war. Whether this changes will depend less on the attack itself, which has already reshaped the political landscape in Tehran, and more on what happens next: how the succession unfolds, how far Iran chooses to respond, and whether energy flows from the Gulf remain secure in the coming days,” says Talha Khan, political economist at Capital Group.
Duration and scale of the conflict
To reassure investors, Khan notes that energy markets tend to recover quickly from geopolitical shocks. In fact, since 1967, none of the major military conflicts involving Israel has had a lasting impact on oil prices, with the exception of the 1973 Arab–Israeli war.
“Today’s global oil system is more flexible than during previous Gulf crises. Non-OPEC supply, particularly U.S. shale, can respond more quickly to price incentives. Strategic reserves exist as a buffer. The energy intensity of GDP is lower than in previous oil shocks. These factors do not eliminate vulnerability to a disruption in the Gulf, but they reduce the likelihood that a brief confrontation will turn into a structural energy crisis,” Khan argues.
Similarly, Banca March acknowledges that it is maintaining its current strategy, as it also believes the conflict will be short-lived. “At the regional level, the markets most affected are European and Asian ones, which are more energy dependent. However, the conflict has erupted at the end of winter in Europe and during a period of milder temperatures in Asia, implying more contained seasonal demand in the coming weeks,” they note.
Messages for investors
Putting themselves in investors’ shoes, Enguerrand Artaz, strategist at La Financière de l’Échiquier (LFDE), acknowledges that escalation risks must be closely monitored, but stresses the importance of avoiding negative overreactions to these events.
“It is worth remembering that, in the vast majority of cases, European and U.S. equity markets post positive performance between one and three months after the start of an armed conflict. Therefore, it is necessary to maintain rationality and discipline in this environment,” he says.
A second reflection for investors comes from Tobias Schafföner, Head of Multi Asset at Flossbach von Storch, who believes the current context reinforces the philosophy of diversifying across asset classes, as well as within each asset class.
“In our view, investors would do well to prepare, at least implicitly, for scenarios that are often overshadowed by major market themes. Recently, the market has focused primarily on artificial intelligence (AI), ignoring potential risks beyond this theme,” Schafföner argues.
In his opinion, when overlooked risks materialize, safe-haven assets such as gold and, no less importantly, the U.S. dollar come to the forefront.
“Precious metals have always been an integral part of our multi-asset portfolios. For this diversification reason, we do not fully hedge our dollar exposure. The liquidity position also follows the diversification principle and is therefore large enough to take advantage of investment opportunities as they arise,” he says.
Finally, Sonal Desai, CIO of Fixed Income at Franklin Templeton, believes investors should not lose sight of the next steps by central banks. In the short term, higher oil prices should raise inflation expectations and lead to a less accommodative stance by the Federal Reserve (Fed), the European Central Bank (ECB), and other major central banks.
“The U.S. dollar is likely to strengthen temporarily, reflecting both a downward revision in expectations for Fed rate cuts and the fact that the U.S. economy is far less vulnerable to an oil shock than the rest of the world. In addition, U.S. Treasuries could receive safe-haven inflows, although given the inflation risk, I do not expect a sustained rally in the long end of the curve. Emerging markets will be put to the test, especially oil-importing countries, which are more vulnerable,” Desai says.
Let’s talk about opportunities
In this context, Artaz stresses that the sharp declines seen in certain stocks and market segments may offer opportunities to strengthen positions in high-quality companies at attractive prices or to initiate positions in firms whose valuations previously seemed too high.
“We are also maintaining the protection strategies initiated in recent months in certain funds, particularly in our diversified funds,” he adds.
For Nitesh Shah, Head of Commodities and Macroeconomic Research at WisdomTree, companies that are intensive in physical assets and have low obsolescence risk, such as utilities, infrastructure operators, energy producers, and transport companies, could show greater resilience.
“These companies are less exposed to rapid technological disruption and often provide essential inputs for energy systems and defense supply chains. On the first trading day after the escalation, oil outperformed gold. However, the fact that Brent has not sustainably exceeded $80 per barrel suggests that high inventories are acting as a temporary buffer. If the conflict persists or expands, risk premiums would likely rise, with gold reflecting geopolitical stress more markedly in the coming weeks,” Shah notes.
Rethinking long-term investing
Against this backdrop, the BlackRock Investment Institute (BII) goes a step further, arguing that a new approach to portfolio construction is needed.
“Traditional strategic asset allocation is no longer sufficient in an environment dominated by structural megaforces. It is essential to regularly reassess the main investment theses and focus on the underlying economic drivers,” they argue.
In their view, the new conflict in the Middle East, the correction in the technology sector, and Nvidia’s results illustrate how structural megaforces are reshaping markets in real time.
“Although they are widely recognized, the scale and direction of their long-term impact remain uncertain. Since there is no single long-term scenario, it makes sense to review investment theses more frequently and prioritize economic fundamentals over traditional asset labels. On a strategic horizon of at least five years, we overweight high-yield corporate debt and infrastructure investment,” they conclude.
