Global markets are on edge as they asses the sudden escalation in Middle East tensions, but investors are being urged to remain calm, stay invested, and ensure their portfolios are diversified.
Iran’s missile strikes against Israel, in retaliation for the killing of Hezbollah leader Hassan Nasrallah, have heightened fears of a broader regional conflict.
MSCI’s global equities index registered losses on the news.
Uncertainty, Instability
With Israel pledging a strong response, the risk of further instability is increasing volatility across global markets.
Geopolitical uncertainty in the Middle East, a critical hub for global energy production and trade routes, is a well-known trigger for market disruption.
In the immediate aftermath of the attacks, investors are seeking safer assets in a flight to safety, as they re-evaluate risk in light of potential further escalations.
The dollar index is up, and gold surged about 1%, as investors shift away from riskier assets such as stocks and emerging market equities.
Yields on U.S. Treasuries and other government bonds are likely to fall as demand increases, pushing prices higher. U.S. Treasuries, in particular, are seen as one of the safest places to park money during times of geopolitical turmoil, and this trend is expected to continue as tensions flare.
Global stock markets are expected to face increased volatility in the coming days as the situation evolves.
Key sectors that are highly sensitive to geopolitical risks, such as energy and defense, can be expected to experience heightened activity.
Oil prices have already begun to rise — up by around 3% — driven by concerns about supply disruptions from the Middle East, which could have significant ripple effects on inflation and economic growth.
However, this initial turbulence does not mean investors should panic.
While markets may experience temporary turbulence, history teaches us that such geopolitical shocks are often short-lived, with prices stabilizing as the situation becomes clearer.
Reacting emotionally and making impulsive decisions during market swings can be detrimental to long-term financial goals. Selling investments in the heat of the moment locks in losses and prevents investors from benefiting from eventual market recoveries.
Instead, it’s important to maintain perspective.
Volatility is a normal part of investing, and while geopolitical crises can shake markets in the short term, the long-term upward trend of the market has historically prevailed. Staying invested through periods of volatility ensures that investors are positioned to benefit when stability returns.
A key strategy for managing the risks of geopolitical volatility is diversification. By spreading investments across different asset classes — such as stocks, bonds, commodities, and currencies — as well as sectors and geographies, investors can mitigate the impact of any single event on their overall portfolio.
While geopolitical events such as these may lead to short-term volatility, the best course of action is to focus on the long term.
Investors who maintain a disciplined approach to their portfolios, ensure proper diversification, and avoid emotional decision-making, are more likely to emerge from periods of uncertainty with their financial goals intact.
A calm and measured approach to investing — staying invested, staying diversified, and focusing on long-term goals — will be crucial for navigating the current situation.
2024 US Election
Washington had long advised Israel against launching any offensive against Hezbollah. And once Israel did initiate hostilities towards the end of September, the Biden administration joined other countries in calling for an immediate ceasefire in Lebanon — a request Israel chose to ignore.
The Israeli government's decision to disregard the wishes of its key ally, reflects a deeper contradiction in American foreign policy.
While the Biden administration urges Israel to exercise caution in Gaza and Lebanon, it also consistently pledges to defend Israel from the repercussions of any military escalation, citing a commitment to protect Israel from threats posed by Iran and other regional adversaries.
This dynamic enables Israel to defy U.S. demands with little fear of consequence. In fact, it may even see potential benefits if American military forces become engaged against Iran.
The likelihood of the U.S. refusing to back Israel during a crisis is low, especially with the election just over a month away.
Although Vice President and Democrat presidential candidate Kamala Harris has shown some willingness to adopt a tougher stance with Israel Prime Minister Benjamin Netanyahu over Gaza, she’ll likely want to project unwavering support for Israel in this critical moment. Moreover, she can’t afford to seem lenient on Iran.
Therefore, the current volatile situation could prove problematic for Harris.
Former President and Republican presidential candidate Donald Trump often claims that peace prevailed during his administration and that the “weakness” of President Joe Biden’s leadership has led to more conflicts around the world. This recent escalation fits perfectly into Trump’s narrative.
As such, there’s reason to believe that the Israel and Iran escalation appear could play out to Trump’s advantage in the race to the White House.
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London-born Nigel Green is founder and CEO of deVere Group. Following in his father’s footstep, he entered the financial services industry as a young adult. After working in the sector for 15 years in London, he subsequently spent several years operating within the international space, before launching deVere in 2002 with a single office in Hong Kong. Today, deVere is one of the world’s largest independent financial advisory organizations, doing business in 100 countries and with more than $12bn under advisement. It specializes global financial solutions to international, local mass affluent, and high-net-worth clients. In early 2017, it was announced that deVere would launch its own private bank. In addition, deVere also confirmed it has received its own investment banking license.