Putting the Iran conflict into perspective

The geopolitical shock of the joint US and Israel attack on Iran has rippled across global markets, but the effects differ by region, asset class and macro driver.

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The conflict quickly moved from geopolitical shock to market stress

Heightened inflation expectations reinforced an already cautious stance across risk assets. In the US, softening labor market data raised the specter of a stagflationary spiral.

Macro uncertainty has added to investors’ concerns

International markets felt the impact more acutely than the US, partly due to greater direct exposure to energy prices. This changed the calculus on the international investment narrative.

Regional divergence became a key theme

Thematic and sector implications: defense enters the frame

Oil prices. US dollar strength. Global risk appetite.

Emerging markets faced amplified stress EM equities and EM debt witnessed larger drawdowns due to their sensitivity to:

Treasury yields rose as inflation risk increased. Credit markets began to price wider spreads due to higher volatility and geopolitical uncertainty.

Our view from here

For now, our investment teams are treating the Iran conflict as a temporary market headwind that should have limited impact on equity, fixed income and private markets. Should the war drag on and global oil supplies be permanently damaged by events, we would reassess our view. At present, however, this episode looks more like just another brick in the wall of worry for investors concerned by many aspects of the economy. Revisit this page for future updates as our views evolve.

Fixed income experienced a dual shock Fixed income has adjusted across every major sub asset class, with the Iran conflict serving as a key reference point for yield moves, spread behavior, and liquidity conditions.

Energy supply fears emerged. Oil prices rose sharply. Stocks and bonds sold off as investors priced in inflation risk.

As geopolitical tensions escalate, defense stocks could justify a strategic allocation case. The Iran conflict strengthens the long-term investment opportunity, as global defense spending is likely to rise for multiple years.

DISCLOSURES Views are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector The value of investments and income from them may go down as well as up, and you may not get back the original amount invested. Past performance is not a reliable indicator of future results. 2428126405