Market Movements - Conflict in the Middle East

As you will no doubt be aware, financial markets have experienced a more unsettled period over recent weeks, driven largely by developments in the Middle East and their potential impact on global energy supplies. 

Since late February 2026, oil prices have climbed from around $60 per barrel to close to $100 per barrel, briefly approaching levels last seen in 2022 following Russia’s invasion of Ukraine and the resulting disruption to global energy markets. As is often the case, this triggered a swift reaction across financial markets, as investors reassessed the outlook for inflation, economic growth, and interest rates. More recently, tentative signs of de‑escalation have led to a moderation in oil prices and an improvement in broader market sentiment.

While the headlines have been unsettling, it is important to contextualise recent moves and to understand what is currently driving market behaviour.

What has been driving recent market moves?

The immediate concern for markets has been the risk of disruption to oil and gas supply routes. Energy remains a key input into almost every part of the global economy. When prices rise sharply, markets quickly start to consider two risks at the same time:

• Higher inflation, as energy costs feed through to transport, manufacturing and household bills
• Weaker economic growth, as higher costs act as a drag on consumers and businesses

This combination is sometimes referred to as “stagflation” and can be a more challenging environment for markets if it becomes entrenched.

So far, markets are not pricing this as a prolonged or inevitable outcome. Instead, we are seeing sharp but often short-lived reactions as news flow changes day by day. Small signs of de-escalation continue to lead to brief, and sometimes strong, rallies, while renewed tension has resulted in equally rapid pullbacks.

How does this compare to previous periods?

The comparison with 2022 is helpful, but there are important differences.

In 2022, inflation was already high and rising before the shock from the Russia–Ukraine war. Central banks were behind the curve and ultimately had to raise interest rates aggressively, which weighed on both equities and bonds at the same time.

This time, inflation had been falling towards central bank targets before recent events. While higher energy prices clearly pose a risk, the starting point today is more stable than it was four years ago. That is one reason why markets have been volatile rather than one-directional.

It is also worth remembering that markets have delivered strong returns over the last few years despite multiple shocks; from the pandemic, to double-digit inflation, to rapid interest rate rises. Periods of uncertainty are not unusual, even if they feel uncomfortable as they happen.

Short-term uncertainty versus long-term investing

At times like this, it can feel as though markets are being driven purely by headlines. In the short term, that is often true. Financial markets are forward-looking and will quickly attempt to price in possible future outcomes, even when those outcomes are highly uncertain.

What matters most for long-term investors is that no one can reliably predict how geopolitical events will evolve, or how markets will respond from week to week. Prices can move sharply in either direction as news changes, and short-term volatility is often amplified by lower liquidity or technical factors.

Historically, periods of heightened uncertainty and market weakness have often gone on to present attractive long-term opportunities, particularly when viewed over a medium-term horizon of three years or more. This does not mean markets move in a straight line, but it does highlight the value of patience and discipline.

Our approach

We continue to monitor developments closely, but our focus remains on:

• Maintaining well-diversified portfolios.
• Avoiding reactive decisions based on short-term news flow.
• Keeping investment strategies aligned with clients’ goals, time horizons and tolerance for risk.

Periods like this are uncomfortable, but they are also a part of investing. Staying invested, diversified and focused on the long term has historically been far more effective than trying to anticipate short-term market moves.

As always, if you would like to discuss recent market developments or how they relate to your portfolio, please do not hesitate to contact your wealth manager.

Written by Jonty Brooks

General Disclosures: This article is based on current public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates and forecasts contained herein are as of the date hereof and are subject to change without prior notification. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.