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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Can US stocks continue to rise in the face of inflation news caused by the Iran conflict? If they do, it might be due to tailwinds such as:

Heightened inflation expectations reinforced an already cautious stance across risk assets. In the US, consumer sentiment began to sour. The oil price spike complicates expectations of additional interest rate cuts in 2026.

Macro uncertainty has added to investors’ concerns

A shift in capital flows in the Middle East. An overhaul of energy security in nations across the globe. A further weakening of European Union industrial competitiveness.

The long-term implications of the Iran conflict will take time to materialize, especially for emerging markets

Thematic and sector implications: defense enters the frame

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.

Strong earnings of US companies. A patient Federal Reserve. Stellar productivity gains. Normalization of the US/China relationship.

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

Redefining the operational competitiveness of EM corporate issuers in general and oil producers in specific. Rising prices will not raise all boats but lead to regional winners and losers. Scale will be a key determinant as larger oil producers likely will dominate smaller operators.

For emerging market debt, the disruption in the flow of oil is having a profound impact:

Stresses in private credit. The AI disruption challenge in the software sector. US macro data. Earnings season.

With the conflict still unresolved, investors began to factor in other potential catalysts of market movement