Investment Market Update – Iran and Israel conflict

Every quarter, our internal investment committee meet to reflect on the times we are in and strategically position client accounts for coming months and years.  The outcome of this month’s meeting will be shared with you, our clients, at some point in July.

Until then, in what has become a fast-moving matter in the Middle East, we recently chatted with our investment consultant Zenith to get an insight of what to expect.  Damien Hennessy from Zenith shared some of this thoughts which are paraphrased below.

Tensions between Iran and Israel escalated significantly in the past week, culminating with the US entering the conflict on the weekend, striking three nuclear sites in Iran. US planes dropped bombs on Fordow, Natanz and Isfahan, seeking to disable the Islamic republic’s nuclear enrichment capability and end its suspected pursuit of an atomic weapon. 

The US action comes after signs that nuclear negotiations between the US and Iran had stalled and follows Israel’s June 12 2025 pre-emptive strikes near Tehran, the capital of Iran. 

And what has been the market impact since?

For now, the impact has largely been limited to oil prices. Although it’s very early, markets are taking the view that the conflict may be short-lived with equity markets off only marginally while bond markets are relatively steady. The US dollar has strengthened, as it typically does in periods of military conflict while gold remains well supported. Energy stocks are clear winners. 

How does this impact the short to medium term economic outlook?

• Higher oil prices could raise US inflation, which counters the work done to date by the US reserve bank (The Fed) to ease interest rates.
• Higher energy costs divert household income from other spending.  Discretionary spending is the first thing to be cut.
• Higher oil prices and higher inflation would make it difficult for the US Fed to cut rates, even if the economy is slowing.

What should I do?

So much is said of what one should or could do when the world and markets are uncertain.  However, so much in life is out of our control, whether it’s the weather or the results of our favourite sports teams. Similarly, with investing you can’t control the ups and downs of the market caused by central bank policy or world conflict, and at Muirfield we prefer for you to focus on the things you can control.

• Your Investment Strategy: Stick to your long-term plan. Avoid making emotional decisions based on short-term market movements, and ensure your portfolio is diversified.
• Your Emergency Fund: Make sure you have enough cash set aside to cover 3–6 months of living expenses. This provides a safety net and reduces the need to sell investments during downturns.
• Your Spending: Review your budget and focus on essential expenses. Reducing discretionary spending can help you stay financially resilient during uncertain times.
• Your Contributions: Continue regular contributions to your investment or superannuation accounts if possible. Volatility can present opportunities to buy at lower prices.