A Word on Markets—and the News Cycle

Recent headlines have been dominated by rising tensions in the Middle East. It is, first and foremost, a deeply concerning situation on a human level. Naturally, it also raises questions about the potential implications for markets and your investments.

It is therefore worth stepping back and separating what feels significant from what is likely to have a lasting impact on portfolios.

Do Geopolitical Events Impact Markets?

The short answer is: yes—but typically in the short term, and often less than headlines imply.

Markets react quickly to uncertainty. Short-term falls, oil price spikes, and increased volatility are normal. However, history shows that unless geopolitical events materially disrupt global growth, their impact on long-term market returns tends to be limited.

In our view, this distinction is critical—and often overlooked in periods of heightened news flow.

What Markets Have Actually Been Doing

Despite ongoing geopolitical tension, trade frictions, and economic uncertainty, markets have remained notably resilient.

We do not see this as complacency. Rather, markets are behaving rationally—continuing to anchor on the outlook for corporate earnings, economic growth, and monetary policy.

In other words, while the narrative has shifted, the underlying drivers of market returns have not.

Why This Matters Right Now

The key transmission channel from current events into markets is energy—specifically oil prices—and, by extension, inflation.

We are already seeing early signs of this in the UK, where CPI rose to 3.3% in the 12 months to March 2026, with motor fuel prices playing a meaningful role.

Our view is that this represents a near-term inflation risk, rather than the start of a sustained inflation cycle. Unless energy prices move materially higher from here, the broader disinflation trend remains intact.

Central banks appear to share this cautious but measured stance:

• The Bank of England has held rates at 3.75%, signalling a willingness to wait rather than react prematurely.
• The Federal Reserve has also paused, emphasising uncertainty rather than signalling renewed tightening.
• The European Central Bank continues to balance weaker growth with inflation risks linked to energy.

Taken together, we interpret this as a policy environment that remains broadly supportive for risk assets—albeit with periods of volatility.

What Should Investors Do?

This is where we think it is important to be clear.

• Avoid reacting to headlines
  The temptation to “do something” during geopolitical events is strong, but often counterproductive. Markets typically price in uncertainty quickly.
• Stay invested—and stay diversified
  Missing even short periods of market recovery can have a disproportionate impact on long-term returns. Diversification remains key, particularly when leadership across markets continues to rotate.
• Be prepared for volatility, not surprised by it
  We expect markets to remain sensitive to news flow in the near term. That is not a signal to reduce exposure, but a reminder that volatility is a normal feature of investing, not a flaw.

A More Direct View on Positioning

Importantly, we do not believe the current environment warrants a defensive shift in long-term portfolios; volatility presents opportunity and we have had reports from the asset managers of some of the benefits that the market conditions have presented.

While risks have clearly increased at the margin, the fundamental backdrop—moderating inflation, stable policy rates, and resilient economic activity—remains supportive.

In our view, investors who remain disciplined and fully invested are more likely to be rewarded than those attempting to tactically navigate short-term geopolitical developments.

A Final Thought

It is entirely natural to feel uneasy when geopolitical tensions dominate the news cycle. However, these periods often test investor behaviour more than they change investment outcomes.

Our focus remains on building portfolios that are resilient by design and aligned with long-term objectives—so that no single event dictates results.

Diversification does not guarantee against loss, but it remains one of the most effective tools for managing uncertainty. Our philosophy is to prepare, not predict—while maintaining conviction in long-term market fundamentals.

As always, if you have any questions or would like to discuss your investments, we are here to help.

If you would like to review your financial plan in light of current market conditions, please contact your dedicated financial planner.