Strategists and fund managers at Artemis have shared their views on what the ongoing conflict in the Middle East could mean for investors.
Toby Gibb, Head of Investments, said:
“Before turning to investment matters, it is important to acknowledge the human cost of the conflict in Iran. Our thoughts are with all those affected. From an investment perspective, the situation presents real challenges. The duration of the conflict remains uncertain. While some expect a resolution may come within weeks, the range of possible outcomes is wide.
“Energy prices have moved higher, with oil and gas markets reacting to the risk of sustained supply disruption, particularly around the Straits of Hormuz. That feeds directly into inflation concerns. We have already seen bond markets reprice rate expectations, with cuts now largely priced out for this year. How central banks respond will depend on whether these price pressures prove persistent or transitory – and that, in turn, depends on how the conflict evolves, which is something none of us can predict with confidence.
“It is also worth stepping back and recognising that markets have been very strong coming into this episode. Economic data through 2026 has been supportive, credit markets have been well behaved, and equity valuations in many areas have re-rated significantly. That strength provides context but also demands discipline.
“Our fund managers are sticking to their processes, with a resolute focus on company fundamentals. They are not attempting to trade geopolitical outcomes, but they are staying alert to the opportunities that periods of dislocation can present – whether that is adding selectively to credit or recycling capital into more attractively valued areas of the equity market.”
Ed Legget and Ambrose Faulks, UK equity managers, said:
“Closing the Straits of Hormuz also closes off 90% of Iranian oil and gas exports. Even prior to this, Iran’s economy was on its knees. Losing the vast majority of export revenues could well prove existential for the regime, which will need to be writing more cheques than normal to buy loyalty. China relies heavily on exports from the Middle East for both oil and gas. It will not want high prices for too long.
“Meanwhile, Trump has the midterm elections coming up. He needs a deal, lower oil prices and something he can sell as a win. Overall, then, it feels like all sides in the conflict need a de-escalation inside four weeks – and possibly sooner. The effect on the UK economy specifically will clearly depend on where commodity prices go. However, we do not foresee much impact over the short term. The rising price of oil will lead to higher pump prices, but the impact will be dampened by the high proportion of tax in the price.
“Utility bills are priced quarterly, and we already know the price cap for April is moving lower. So any changes will feed through in July, when demand for gas is low anyway – and by then, hopefully, there should be a lot more clarity on the Middle East. Based on numbers we have seen, the price rises of both oil and gas have the potential to add 0.3-0.4% to UK CPI if current prices are sustained for the rest of the year. Overall, we do not expect a huge impact on UK consumers or a material change in the direction of UK monetary policy.”
Stephen Snowden, Head of Fixed Income, said:
“Economic data has been “goldilocks” in 2026, with inflation mostly well behaved, especially in the UK, and economic activity indicators healthy. Iran causes uncertainty, but the unfortunate truth is that conflict and concerns about the Middle East are a constant risk for markets. As serious as this situation is, we do not see it giving rise to a major macroeconomic shock. The biggest risk to markets remains AI disruption.
“Seasonally, we are in the weakest period for credit markets. Sell-offs are common in February and March and typically prove to be a good chance to buy the dip – which is what we did on the first day of March.
“Also, the market response this time around has been all about energy prices and inflation impact. The ‘positive’ from this is it means we can worry less about the sort of extreme tail of inflation we saw in 2022.
“Finally, in terms of gilts, the good news for the Prime Minister is that the conflict has kicked Mandelson etc off the news agenda – at least for now. The chances of a leadership contest before the May local elections now feels very low, and that should subdue domestic political volatility for a couple of months.”
Raheel Altaf, emerging markets equity manager, said:
“History suggests regional conflicts tend to impact asset prices meaningfully if they impact global growth, inflation or financial conditions. In this instance, at this early stage, conclusions remain unclear. The near-term focus has been on energy. The Middle East remains central to oil supply, and price reactions have been swift. We had increased energy exposure in our fund last year, based on valuation and cashflow grounds rather than geopolitical predictions.
“Markets occasionally fall sharply, yet over time they tend to deliver solid returns. While logic suggests adding to investments during downturns, human instinct typically does the opposite – pulling back after falls and piling in after rallies. We believe a systematic framework helps overcome some of these biases.
“Emerging markets tend to be sold indiscriminately in risk-off periods, but they enter this period in relatively strong shape. Many are commodity exporters with strengthened balance sheets, stronger reserves and high real interest rates.
“Importantly, we have made no major portfolio changes in response to headlines. We remain patient, focused on company fundamentals and prepared to adjust only if evidence emerges of diminishing opportunity for our holdings.”
