The US and Israel's recent war on Iran has caused a massive surge in oil prices globally, and a lot of market uncertainty - especially in Asia. However, global markets seem not to have fully priced in this conflict's potential effects just yet. The S&P 500 has fallen, but only by about 2% in the past week, while other global indexes have seen similar minor falls. Other stocks and commodities have even risen considerably. So, what should investors be doing?
This article will look at what global financial experts are saying across a range of sectors, as well as the latest updates in the war. From there, it will also take a look at the possible long-term economic consequences for the UK and others, as well as a few emerging aspects that are less-discussed right now but could have significant investment implications in the future.
Oil Supply Disruption Causing Shock
At the centre of the market disruption is oil. The Gulf region is a huge supplier of international oil, and its essential by-products. Much of which is transported through the Strait of Hormuz, which lies between Iran and many of the Gulf States.
The Strait is just 30 miles wide at its shortest point, meaning ships are well within range of land-based Iranian missiles. Reports indicate tankers have already been hit. Global shipping has been severely curtailed through the route, with insurers refusing to offer cover on the few Western ships currently willing to risk the journey.
On top of that, natural gas and oil fields in Iran have been attacked, and the Iranian regime has targeted production facilities in the UAE, Oman and Bahrain.
This all saw oil surge to $100 a barrel, pushing briefly to the $120 mark. Although countries have released their strategic reserves, and President Trump has indicated the USA could be willing to deploy its navy to escort tankers through the strait, many analysts fear longer-term disruption and prices going significantly higher.
The knock-on effects are already taking a toll. Many large global economies, including the UK have already downgraded growth projections and inflation is hitting consumers in the midst of an existing cost-of-living crisis.
Of course, this just an 800-word blog post. The Iran war and its consequences for the global economy will have much, much more written on it, from some of the world's foremost experts in the field. As an example, you can read more details here from experienced international brokers and investors looking at the situation from a clear buy, sell or hold perspective.
The Market's Winners and Losers (So Far)
As with many geopolitical shocks, some sectors are seeing short-term benefits from price rises while others are under significant and immediate pressure.
One big winner has been oil companies. British-based BP has seen its shares rocket up 19% in the past two weeks, as price increases benefit short-term profit margins and supply uncertainty drives investors to the company.
On the flip side, industries that are heavily oil-reliant for core operations are already struggling. Airlines in particular have been affected considerably. As well as large increases in the price of jet fuel, air operators have had to deal with closures and disruptions from Iranian attacks on global air transport and logistics hubs in the UAE. Consumer-facing businesses could also face a hit, as higher energy prices force households to cut back on discretionary spending.
One interesting case has been the defence contractors. British firms BAE Systems and Rolls-Royce have both been trading slightly down over the past week, as have US giants Lockheed Martin and Northrop Grumman. These companies face a mixed outlook. The uncertainty around possibly escalating global conflicts should push militaries into boosting their military spending, which would benefit them immensely. However, they rely on oil and its by-products in a massive way, so any price increases and supply disruptions could also hit them hard.
The unexpected increase in demand while oil supplies are squeezed could also stymie production for some months, even with President Trump recently meeting with execs from top US defence firms in a bid to increase production.
Looking at the wider market, the S&P 500 and other big global stock indexes have remained resilient. Suggesting the market sees this conflict as a short-term shock - a risky assumption given the geopolitical climate and the currency trajectory of the war.
Practical and Actionable Investment Advice
So what can investors do in this situation? Well, most analysts are currently leaning towards hold while buying the dip in a few situations. Panic selling is not only a poor strategy for individual investors, but it can also and has historically contributed significantly to market crashes.
The key signal to focus on is oil prices. Headlines and geopolitical sentiment fluctuate. Sustained prices are the only thing that matters. If they continue to rise for more than a few weeks, heavily oil-reliant stocks could take even bigger hits.
Investors should consider hedging their bets with exposure to sectors that benefit from strong energy prices and general economic insecurity due to inflation. Oil stocks are an obvious target, but commodities are worth looking at to. Gold and silver are actually down right now after hitting historic highs in 2025, while typically they have increased in value in times of war and uncertainty.
Finally, consider holding a relatively significant amount of liquidity in the short term. Periods of geopolitical shock can create opportunities for those with capital to take advantage, as markets react to short-term shocks, creating mispricing.