Iran’s unprecedented retaliatory attack on Israel over the weekend rattled markets and shocked investors, but most wealth managers are cautiously optimistic that the conflict won’t intensify. Risks are elevated, and they remain concerned that a wider conflict and rising tensions could lead to higher oil prices, more inflation and chaos.
“Risks are higher than before this weekend, but so far, these events do not derail our constructive view for the year ahead,” said Madison Faller, global investment strategist at JPMorgan Private Bank. “In the end, staying invested in a diversified, goals-aligned portfolio has benefited through countless geopolitical crises, wars, pandemics and recessions — and we believe that should remain true.”
Faller is closely watching the conflict’s impact on natural resources and the economy and the follow-through into price action — the risk of an “escalation that leads to inflation volatility and macro uncertainty that upends sentiment and business investment.”
If tensions keep rising, markets will tighten “really aggressively,” and oil could spike an additional $20 per barrel, said Mark Lacey, Schroders head of global resource equities. He told Citywire that investors with commodities exposure should be watching closely as well as keeping an eye on supply disruptions related to the London Metal Exchange’s announcement that it would adhere to U.S. and UK sanctions against Russia.
Blackrock told clients that the weekend’s conflict reinforced its view that “we are in for a higher-for-longer interest rate environment.”
Some wealth managers at family offices went further, predicting that the conflict “will be a sliding-doors moment for the power structure of the rest of the world” that could have major implications for the global economy, wrote Dion Guagliardo, managing partner at the Fortress Family Office.
“All the nations involved in conflict around the world, or potentially involved in conflict, are well-aware of this," Guagliardo wrote. "So perhaps it’s less about whether geopolitical tensions will rise but more about where they will arise.”