Investment Implications of US Iran Conflict

We have put together a short video on the investment implications of the ongoing US-Iran conflict, in response to the many investor queries we have been receiving on the subject. Our broad thesis is that the situation should be viewed through two lenses. First, the historical lens. In most major geopolitical shocks, markets tend to react sharply in the near term, but the direct impact of the conflict itself often fades faster than investors initially expect. This is why periods of panic during wars have, in many cases, gone on to become attractive points to accumulate equities. Second, the present lens. What makes this conflict more important than a standard geopolitical flare-up is Iran’s location and its proximity to both the Strait of Hormuz and major Gulf energy infrastructure. This creates a genuine tail risk of a larger and more prolonged energy shock. If such a scenario were to play out, the implications would extend well beyond sentiment, affecting inflation, margins, demand, trade balances, and broader economic growth. Our base case continues to be that the conflict is more likely than not to move towards a relatively near-term resolution, which would support a market recovery. However, we would caution against becoming complacent simply because this remains the most likely outcome. In our view, the probability of a prolonged disruption may still be limited, but the impact of such an outcome would be significant enough that it deserves respect. This is why our current stance is not one of panic, but neither is it one of complete aggression. We do not believe investors should exit existing portfolios in response to near-term uncertainty. For fresh capital, however, a staggered approach appears more balanced than a full lump sum deployment today, particularly with markets not having fully priced in the more adverse tail scenarios.