Recent Developments in the Middle East

We are writing to update you on recent developments in the Middle East and what they may mean for your investments.

On 28 February 2026, the United States and Israel carried out coordinated military strikes against targets in Iran. Since then, the situation has escalated into a broader regional conflict. Multiple international news organisations report that Iran’s Supreme Leader, Ali Khamenei, was killed during the strikes. There is uncertainty about the longer-term political direction of the country.

Events of this scale understandably create concern. Financial markets, however, tend to respond in predictable ways to geopolitical shocks.

The most immediate impact has been in oil markets. Oil prices have risen sharply due to fears that supplies could be disrupted. A key focus is the Strait of Hormuz, a narrow shipping route through which roughly one fifth of global oil supply passes each day. If shipping through this route were disrupted, it would affect energy markets worldwide. Even the possibility of disruption is enough to push prices higher in the short term.

Higher oil prices can feed into inflation because energy is a core input cost across the global economy. This can raise transport, production and heating costs. At this stage, it is too early to know whether this will be a short-lived spike or something more prolonged. The Northern Hemisphere is leaving winter; therefore, energy prices tend to fall as the weather warms. If the conflict were to have occurred at the onset of winter the effects would be more pronounced.

Share markets have been volatile, which is typical during periods of military conflict. Sectors such as airlines, travel and businesses dependent on Middle Eastern transport routes have been most affected due to higher fuel costs and possible route disruptions. Broader market movements reflect uncertainty rather than a sudden deterioration in global economic fundamentals.

During periods like this, investors often move funds into so-called ‘safe haven’ assets such as US government bonds, the US dollar and gold. This is a normal reaction to heightened uncertainty and does not necessarily signal deeper financial stress.

Client portfolios have limited direct exposure to Middle Eastern economies, which represent a small share of global markets. The main area to watch is energy prices and global trade routes. If the conflict is contained and short-lived, market impacts are likely to moderate. If disruption to oil supplies or key shipping routes continues for an extended period, volatile market conditions could persist for longer.

We have not made any changes to portfolios at this stage as we remain constructive towards equites. Within our allocation to fixed income our managers, for the most part, follow a flexible approach. Therefore, we would expect them to alter course where appropriate and exploit short term opportunities as they arise. Our investment approach is diversified and built to withstand periods of uncertainty. History shows that reacting too quickly to geopolitical headlines can damage long-term returns. We are monitoring the situation closely and will act if the economic outlook changes in a meaningful and lasting way.

As always, our focus remains on protecting and growing your capital over the long term. Please contact us if you would like to discuss your investments in more detail.