How should investors react to geopolitical uncertainty in the Middle East?

In light of recent geopolitical conflicts involving the US, Israel, Iran and other gulf nations, UK investors may be concerned about the potential impact on their portfolios in the short and long term.

With the situation moving quickly, we must look at what we know and not speculate where we cannot.

What we know

The price of oil has increased following the escalation in the Middle East. Some stocks have fallen, and the price of gold rose to $5,400 an ounce.

Geopolitical flashpoints are common and often a source of volatility spikes (for example, we witnessed a modest spike in response to strikes in June last year, and a bigger spike after the roll-out of tariffs by the US almost a year ago). Volatility is a natural part of the investing journey, so we encourage clients to take a long term view rather than reacting to external events which might have a much shorter, albeit unpredictable, duration.

“What follows in Iran could depend on what the regime does next, given the loss of most of its senior leadership,” says Scott Gardner, Investment Strategist at J.P. Morgan Personal Investing.

“The White House has so far stated that it has no interest in a prolonged conflict,” Gardner continues. “If the Iranian regime doesn’t engage with the US diplomatically and focuses strikes increasingly on oil infrastructure (tankers, pipelines, refineries), the spike in oil prices could evolve into inflationary pressures longer term.”

“These are fast-moving events and it’s important not to try and pre-empt what might happen with too much certainty.”

We are therefore not currently making any changes to the portfolios, although we stand ready if the opportunity arises.

What can investors do?

As an investor, trying to remain focused on the long term during crises can be difficult. However, our analysis shows that over the long term, investors in a wide variety of equity and bond markets outperform cash savers. It should be noted that while historic data can be a useful reference point, when investing nothing is guaranteed and capital is at risk. Past performance is not a reliable indicator of future performance.

Although none of us can control the news, or the reactions of other investors around you, you can control the impulse to make hasty decisions. Many of our seasoned investors already know this, because in the past the vast majority of our investors have ridden out these market storms without changing their portfolios*. However, if you’re feeling nervous about how recent financial market performance could affect your investment goals, our team is here to talk.

The investment team continues to actively manage portfolios for its Fully Managed, Socially Responsible Investing and Thematic Investing clients. The Smart Alpha portfolios are actively monitored by the J.P. Morgan Asset Management team who provide guidance to our investment team on changes to portfolios based on market conditions, leveraging their deep research-driven insights. For Fixed Allocation clients, portfolios are adapted once a year. Long-term investing can reward attention to economic and business fundamentals, which are more long-lasting than geopolitical events.

During a tumultuous period it might be tempting to withdraw some investments and remain in cash. It’s worth considering, however, the relative returns of cash and investments. Recent history indicates that cash is unlikely to outperform a multi-asset portfolio. J.P. Morgan Asset Management analysis of the periods following a selection of geopolitical and economic shocks since 1990 shows that a portfolio composed of 60% equities and 40% government bonds has outperformed cash more than 70% of the time over a one-year horizon, and always outperformed over the three-year timeframes. Therefore, hiding in cash has historically been an incorrect approach.

Hiding in cash is typically not the way to avoid geopolitical risk

Subsequent 1-year and 3-year returns over cash, following market shocks

Source: Bloomberg, S&P Global, J.P. Morgan Asset Management. '0’ represents holding money in cash. 60/40 portfolio is constructed using S&P 500 Index and S&P 10-year US Treasury Note Futures Index. Cash: ICE USD LIBOR (3M). Return calculation begins at the end of the month prior to the shock. Data as of 30 November 2025. Past performance isn't a reliable indicator of future performance.

Risk warning

As with all investing, your capital is at risk. The value of your portfolio with J.P. Morgan Personal Investing can go down as well as up and you may get back less than you invest. Past performance and forecasts are not reliable indicators of future performance. Thematic investing carries specific risks and is not for everyone. We do not provide investment advice in this article. Always do your own research.

*In 2022, we looked at seven events going back to 2012 to see if our clients changed their behaviour in response to market volatility. An average of 97.8% of our clients did nothing out of the ordinary.