Investors have been urged to hold their nerve in the face of volatile global stock markets today, as the Middle East conflict increased intensity.
The growing conflict between Iran and US-Israeli forces has boosted oil prices and dampened shares, with travel stocks particularly hit.
As attacks on Iran continue, Tehran has targeted US allies across the Gulf region in retaliatory strikes, including an RAF station in Cyprus, while Israel is targeting Hezbollah bases in Lebanon.
The escalation sent a warning through financial markets, intensified by a sharp rise in oil prices. Brent crude has surged at the fastest rate in four years, rising almost 10% to around $80 a barrel.
The FTSE 100 slipped by 1% in early morning trading as dealers waited to see how development would pan out, but experts warned investors to remain calm.
Lindsay James, investment strategist at Quilter, said: "For investors, this is the time to hold your nerve. Events such as this can be unsettling, but remembering the reasons why you invested in the first place, and staying the course over the long-term will continue to be the best strategy, even if we get a period of volatility while events in the Middle East play out.”
She said that events in Iran in recent days “have brought the vague concept of ‘higher geopolitical risk’ from the back pages of presentations to the forefront of investors’ minds but added that “calm should prevail in markets before too long, even if a period of volatility may now be in store.”
Adam Hetts, global head of multi-asset and portfolio manager at Janus Henderson Investors, echoed that sentiment. He said: “Investors should recognize that in the immediate aftermath of an event of this scale there will be a jarring set of headlines and we are seeing high, potentially peak, uncertainty.
“We advocate for taking a long-term view to investing rather than reacting to near- term volatility. This means maintaining well-diversified portfolios including high-quality safe-haven assets able to weather short-term uncertainty.
“It also means staying invested, rather than trying to market-time geopolitical realignment and the associated risk. Instead, we believe in maintaining exposure to the long-term secular growth trends that will continue to shape markets globally.”
Susannah Streeter, chief investment strategist, Wealth Club, reported that “Investors are scuttling towards safe havens, seeking shelter as conflict widens in the Middle East.”
She pointed out that London’s blue-chip index “looks set to hold up better than some of its peers due to the resilience of its constituents in the face of heightened global tensions.”
She said mining stocks are benefiting from the surge in precious metals prices, while oil giants BP and Shell have also risen sharply as oil prices climb. Demand for defence stocks has increased again as military spending looks set to deepen further.
Emma Wall, chief investment strategist, Hargreaves Lansdown, said: “Investors have reacted to events in the Middle East over the weekend by turning ‘risk-off’, buying in to the perceived safe havens of gold, the US dollar and the Swiss franc.
“Gold rallied 1.9%, hitting higher than $5,400 in early trading, cementing its position as the uncertainty trade and inflation hedge. This is still off the all-time high of $5,589 but comes off the back of a near 20% rally year to date.”
She warned investors to be wary of piling in at “these elevated prices, but we do think the perceived safe haven appeal of gold in times of uncertainty remains and gold has an important role to play in portfolios this year.”
Dan Coatsworth, head of markets at AJ Bell, said: “The uncertainty factor reigns again. “Scenes in the Middle East have caused widespread nervousness across financial markets. The US attacks on Iran have caused oil prices to soar amid fears of disruptions to supplies, pushing up costs for businesses and consumers.
“While these scenarios will be front of mind, investors might be taking one day at a time while they try to ascertain if this is a short, sharp event or one that could drag on for ages. Staying calm and not making knee-jerk reactions to investment portfolios is important."