Global markets are reacting to a significant escalation of conflict in the Middle East following coordinated strikes by the United States and Israel against targets within Iran over the weekend. The attacks, which reportedly resulted in the deaths of Iranian political and military leaders, including Ayatollah Khamenei, have been met with retaliatory strikes by Iran targeting bases housing U.S. Forces in the region. The situation is further complicated by the Islamic Revolutionary Guard Corps’ prohibition of ship passage through the Strait of Hormuz, and the suspension of cargo insurance coverage by several tanker insurers for vessels transiting the vital waterway. These developments have prompted Neuflize OBC, a leading investment firm, to assess the potential implications for investors.
While geopolitical events invariably carry profound consequences for those directly affected, the impact on financial markets is often more limited, typically manifesting as short-lived periods of increased volatility. Markets, according to Neuflize OBC, assess events through a strictly economic lens; absent a substantial impact on the broader economy, reactions tend to be contained. Understanding the potential for market disruption, and the historical context of similar events, is crucial for investors navigating this uncertain period. The firm’s analysis focuses on key risks and offers guidance for maintaining a long-term investment strategy.
Historical Precedent: Market Reactions to Geopolitical Events
Neuflize OBC points to past instances of U.S. Military action against Iran as a guide to potential market behavior. The firm cites the example of U.S. Strikes against Iranian nuclear facilities in June 2025, noting that the S&P 500 actually gained over 5% in the month following the event. Historically, the S&P 500 has shown a slight average decline in the month following major geopolitical events, but the 2025 example suggests that this is not always the case. Based on this precedent, Neuflize OBC does not anticipate a significantly different outcome this time, recommending that investors remain committed to their long-term strategies and avoid making drastic portfolio adjustments.
Despite this outlook, Neuflize OBC acknowledges that markets are not immune to geopolitical tensions. Asian and European stock markets opened lower, down 1 to 3%, and U.S. Futures indicate a similar trend. Stock exchanges in the Middle East are expected to remain closed for at least two days to assess the situation. The primary concern revolves around the uncertainty surrounding oil prices and their potential impact on global economic growth. Bond yields have edged lower, benefiting bonds, whereas risk premiums are expected to rise. Safe-haven assets, such as gold and the U.S. Dollar, have strengthened, while oil prices have increased by approximately 7% and natural gas by around 4%. However, the firm anticipates a swift market rebound should the conflict stabilize or de-escalate.
Key Risks for Investors: Oil Prices and the Strait of Hormuz
Neuflize OBC identifies two primary risks for investors: oil prices and the potential disruption of traffic through the Strait of Hormuz. The Middle East remains a critical supplier of oil to the global economy, and a sustained surge in oil prices could negatively impact economic growth by reducing consumer purchasing power and compressing profit margins for energy-intensive businesses. Higher oil prices could also contribute to increased inflation as companies pass on rising costs to consumers. Oil prices had already risen more than 10% in the days leading up to the attacks, suggesting some of this impact was already priced in. The firm notes that OPEC+ has indicated a willingness to increase oil supply if necessary, which could help mitigate upward price pressures.
A prolonged closure of the Strait of Hormuz, a narrow maritime passage through which a significant portion of global oil and gas shipments transit, represents a second major risk. Disruptions to shipping through the Strait could strain global supply chains, drive up oil prices, and exacerbate inflationary pressures. Both oil importers, such as India and China, and exporters, like Saudi Arabia, would likely exert pressure to preserve the Strait open.
Neuflize OBC also highlights the U.S. Objective of regime change in Iran, noting that experts question whether this can be achieved through air strikes alone. The duration of the conflict, and the potential for escalation, will be heavily influenced by this factor.
Investment Recommendations: Staying the Course
In times of war, uncertainty is unavoidable. While markets typically react with an initial decline, these reactions are often short-lived. Neuflize OBC advises investors to focus on the risks with the most significant potential impact on the global economy – specifically, developments affecting oil prices and disruptions to maritime traffic through the Strait of Hormuz. At this stage, the firm believes the best approach is to adhere to a long-term investment strategy and avoid making significant changes to portfolios.
The firm maintains a positive outlook on global economic fundamentals, citing improving growth, projected double-digit earnings growth for companies, and the Federal Reserve’s continued accommodative monetary policy. Both the U.S. And Europe are also continuing with fiscal stimulus measures. If the conflict stabilizes quickly, Neuflize OBC believes investors should refocus on these positive drivers.
By Olivier Raingeard, Chief Investment Officer at Neuflize OBC
For further information, please visit the Neuflize OBC website.
The current situation remains fluid and subject to change. Investors should continue to monitor developments closely and consult with their financial advisors. The next key event to watch will be the response from OPEC+ regarding potential adjustments to oil production levels, as well as any diplomatic efforts to de-escalate the conflict.
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