Strikes on Iran: what does this mean for investors?
Over the weekend, the United States and Israel carried out a series of (well coordinated) strikes on Iran, killing Iran’s supreme leader, Ayatollah Khamenei. Iran responded with retaliatory attacks, including strikes on US bases in several countries in the region. Meanwhile, although the Strait of Hormuz has not been officially closed, Iran’s Revolutionary Guard prohibited ships from passing through the waterway on Saturday. Furthermore, several insurers of oil tankers have suspended coverage for shipments moving through the strait.
Most of the Middle East is now impacted by the war, and while the trajectory of the war remains uncertain, this market comment outlines our initial views, expectations for markets, and the key risks investors should monitor.
Market impact is often temporary
Even though war always has profound consequences for those directly affected, its impact on financial markets is typically far more limited and is usually confined to short periods of heightened volatility. Financial markets tend to assess the impact through a financial lens: if there is no broader significant impact on the economy, then the reaction is usually muted.
A good example is the US bombings of Iranian nuclear facilities in June 2025. One month after this event, the S&P 500 had increased by more than 5%, though historically the S&P 500 shows a small loss on average one month after major geopolitical and historical events. For now, we see no reason to expect a different outcome, and we, therefore, advise investors to stick to their long-term investment strategy and not make significant changes to their portfolios.
This does not mean that markets will not respond at all. Equity markets in Asia have opened lower, and in Europe we also expect markets to open 1-2% lower. US futures indicate a similar opening. Exchanges in the Middle East are expected to remain shut for at least two days to assess the situation. Uncertainty around oil prices and their impact on economic growth will be a primary driver. Bond yields are somewhat lower, which is positive for bonds, although risk premia are likely to rise. Gold and the US dollar have strengthened on safe-haven demand. Oil prices are up around 7%, while gas prices have risen approximately 4%. However, should the conflict stabilise, or even better, begins to de-escalate, we would expect markets to recover quickly.
What are the key risks to monitor?
For investors, it is important to focus on areas where the war could pose significant risks to the global economy.
1. Oil prices
The first major risk for investors is oil prices. The Middle East remains an important supplier of oil to the global economy. A prolonged spike in oil prices will have a negative effect on the economy as it would weigh on consumer purchasing power and hurt margins and profitability for energy-intensive companies. Higher oil prices could also lead to higher inflation as companies will pass on the higher costs to consumers. Oil prices had already risen more than 10% in the days leading up to the attacks, meaning some developments were already partly priced in. Importantly, the OPEC+ has indicated its willingness to increase oil supply if needed, which could mitigate some of the upward pressure.
2. The Strait of Hormuz
A second risk is a prolonged closure of the Strait of Hormuz, a narrow waterway through which a significant portion of the world’s oil and gas shipments flow. If ships can no longer pass through the Strait of Hormuz, then this can strain global supply chains and thereby elevate oil prices and amplify inflationary pressures. There will be significant pressure from both oil importers (such as India and China) and oil exporters (such as Saudi Arabia) to keep the strait open.
Investors should keep in mind that the US wants regime change in Iran. Experts wonder whether this can be achieved by airstrikes alone. If not, this could impact the duration of the conflict.
What is our recommendation to investors?
In times of war, unclarity and uncertainty are inevitable, and while markets typically react with an initial risk-off response, such responses are often short-lived. The key risks to monitor are developments impacting oil prices and disruptions to shipping through the Strait of Hormuz. For now, we believe the best investors can do is to stick to their long-term strategy and avoid making significant portfolio changes.
Global economic fundamentals remain supportive. Growth is improving, corporate earnings are expected to grow double digits over the coming year, and the Federal Reserve is expected to ease further. The US and Europe also remain on track with fiscal stimulus efforts. If the conflict stabilises quickly, investors are likely to refocus on the positive drivers.
Read more about the macroeconomic impact in the update ‘Implications of Middle East escalation’ by our Group Economics team at ABN AMRO.
Richard de Groot
Chair Global Investment Committee
Returns are in US dollars; returns may increase or decrease as a result of currency fluctuations. The mentioned returns do not include costs; returns including costs are lower. Mentioned returns refer to the past; past performance is not a reliable indicator of future results.