Over recent years, investors have had to contend with a succession of unsettling events – from the COVID-19 pandemic, to the outbreak of war between Ukraine and Russia, trade tariff disruptions, domestic political uncertainty, and conflict in the Middle East. The current Iran conflict is the latest addition to this unfortunate list and, given its potential implications for global energy markets, inflation and economic growth, it understandably raises questions about portfolio positioning and risk.

In times such as these, we believe it is especially important to remain anchored to a clear investment philosophy and a disciplined decision-making framework.

Our investment philosophy in uncertain times

Throughout all market cycles and external shocks, our approach has remained consistent: long-term, well-considered investing. Rather than reacting emotionally to headlines, we focus on asking a structured set of questions:
 

• Is the event likely to be temporary or permanent?
• How long is it to last?
• What are the key scenarios that could play out?
• What probability should reasonably be assigned to each scenario?
• Given this, how are portfolios positioned today, and are changes required to improve the likelihood of meeting clients’ inflation-linked objectives, appropriate to their risk profiles?
   

Importantly, when events are still evolving – as is the case with the current Iran conflict – forecast risk is inherently high. Our response is therefore to rely more heavily on diversification, valuation discipline and scenario analysis than on point forecasts.

Our current assessment of the environment

The primary transmission channel from the Iran conflict into markets has been through oil prices and, by extension, inflation expectations, growth prospects and interest-rate policy. Under normal conditions, the Strait of Hormuz facilitates roughly 20% of global oil supply, making it a strategically critical corridor. Any disruption or perceived risk to supply naturally drives higher energy prices.

Higher oil prices can negatively affect the global economy in three key ways:
 

1. By raising input costs for businesses,
2. By eroding household purchasing power via higher inflation, and
3. By forcing central banks to keep monetary policy tighter for longer.
    

Against this backdrop, we have updated our scenario analysis.
 

• Our base case assumes elevated oil prices in the current quarter, followed by some reprieve later in the year. Inflation remains sticky but contained, while growth recovers slowly.
  
  
• A downside scenario would involve a more protracted conflict or supply disruption, pushing oil prices meaningfully higher for longer, increasing recession risk and delaying interest-rate relief.
  
  
• A more constructive scenario, while lower probability, would see tensions de-escalate relatively quickly, allowing oil prices to normalise and inflation pressures to ease sooner than feared.
   

At present, despite the high degree of uncertainty, we believe a shorter-lived conflict remains the most likely outcome – though risks are clearly skewed in both directions.

Portfolio positioning: what we are doing – and not doing

Crucially, portfolios are not built for a single outcome. They are designed to deliver robust outcomes across a range of plausible futures.
 

• Portfolios remain diversified, and absolute performance has held up well over the medium term despite volatility.
  
  
• We have maintained a broadly balanced posture, with a modest tilt towards risk assets, reflecting valuation considerations rather than speculative forecasts.
  
  
• Where valuations have become stretched, we have been taking profits and scaling back risk incrementally.
  
  
• We continue to assess all new information on its merits, with equal attention to both risks and opportunities.
  
  
• Gold remains an important strategic diversifier. While short-term price movements can be influenced by factors such as dollar strength, bond yields and positioning, we continue to view gold as being a hedge against persistent geopolitical risk and central-bank diversification away from fiat currencies.
   

What we are deliberately not doing is making abrupt, wholesale changes to portfolios based on short-term headlines. History shows that such reactions often prove costly.

Staying disciplined amid uncertainty

The current environment is undoubtedly unpredictable. However, it is worth noting that we have more information today than we did a month ago, allowing us to refine – not abandon – our views. As events evolve, so too will our scenarios and portfolio calibrations.

Our commitment remains unchanged: to apply discipline, focus on valuations, preserve diversification, and position portfolios to achieve long-term real returns aligned with your objectives.

We will continue to communicate openly as conditions change. In the meantime, we encourage clients to view current market volatility not as a signal for reaction, but as a reminder of the value of a structured investment process.