Assessing the Global Impact of Middle East Volatility

5 March 2026

The first week of March 2026 has brought a swift and significant shift to the global landscape. Over the recent weekend, the US and Israel launched a series of strikes on Iran, leading to a sequence of events with profound global implications. Most notably, geopolitical tensions have escalated into active conflict, with Reuters reporting that Iran’s Supreme Leader was among the casualties in the opening strikes.

For investors, this presents a series of fundamental uncertainties and has driven a sharp increase in market volatility. Below, I intend to examine some of the key considerations we are seeing for portfolios and long-term thinking.

The Strait of Hormuz

The Middle East remains the world’s most critical artery for energy. In 2025, the Strait of Hormuz saw approximately 13 million barrels of oil pass through daily - roughly 31% of all seaborne crude flows, according to a report from Kpler.

Recent articles from Reuters indicate that Tehran has targeted energy facilities and restricted navigation through the Strait. With the Iranian navy claiming control over this waterway, the market has reacted swiftly to the threat of a supply shock. Consequently, Brent Crude Oil is up approximately 36.2% year-to-date (“YTD”) at the time of writing.

Operational and Macro Disruption

The impact extends beyond the oil barrel. We are seeing significant operational "friction" across the global economy:

• Aviation: Over 20,000 flights have been cancelled in the region, disrupting global travel and logistics.

• Infrastructure: Damage to command centres and air-defence systems has heightened concerns over a prolonged conflict.

• Market Sentiment: We observed notable selling pressure at the start of the week as investors moved to de-risk portfolios in anticipation of further volatility.

Market Performance Snapshot (YTD)

Despite the recent sell-off, a look at YTD figures reveals a more balanced picture of where we stand in the world in 2026. While volatility is high, some indices have shown resilience when looking at 2026 as a whole:
 

The "safe haven" trade is clearly visible in the double-digit gains for precious metals, while the S&P 500 has seen a minor decline as the US market weighs the domestic political implications of the conflict. The UK and European indices have also experienced positive performance year to date as investors have looked to diversify away from the US in some aspects on a general view.

Looking Ahead: The Case for Resilience

While the risk of a prolonged war is significant, there are several strategic factors that could lead to a shorter-than-expected timeframe for this conflict in my view:

1. Economic Pressure on Iran: Closing the Strait of Hormuz effectively halts Iran’s own export revenues. For an already weakened economy, losing this lifeline during wartime is unsustainable longer term.

2. Global Diplomatic Interests: China relies heavily on Middle Eastern energy; they are unlikely to tolerate sustained high prices.

3. US Political Cycle: With midterm elections approaching, the US administration has a strong incentive to broker a "win" that stabilises energy costs.

4. Military Capability: The rapid degradation of Iranian air defences may limit their ability to sustain a long-term conventional campaign.

Our Philosophy: Structure Over Speculation

In environments like this, the impulse to react to the "news of the hour" is strong. However, our philosophy remains rooted in the belief that volatility is managed through structure, not speculation.

We maintain a balanced view, emphasising that diversification is not just a defensive posture - it is a strategic necessity. By maintaining exposure across various asset classes - including  historic “safe-haven” assets such as precious metals and the inflation-hedging benefits of energy - we aim to navigate this challenging environment effectively.

Our focus remains on achieving risk-adjusted returns. A disciplined approach to portfolio construction allows us to protect capital today while remaining positioned for the eventual stabilisation of global markets tomorrow.

If you would like to discuss this topic more, contact Ben at [email protected]. 


Ben Potter, CGMA ASCI
Investment Manager

Important information

This article is intended to be Walker Crips Investment Management's own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this document constitutes advice to undertake a transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips. Walker Crips Investment Management Limited is authorised and regulated by the Financial Conduct Authority (FRN:226344) and is a member of the London Stock Exchange. Registered office: 128 Queen Victoria Street, London, EC4V 4BJ. Registered in England and Wales number 4774117.