Periods of geopolitical tension often dominate the headlines, and the recent military action involving the US, Israel and Iran is no exception. Such events naturally heighten uncertainty. As ever, markets digest new information rapidly. Prices reflect the consensus view of millions of participants, each interpreting evolving events in real time. Where the situation goes next is unknowable. Markets will move as fresh information arrives – a random process – and investors should be cautious in drawing firm conclusions from the present moment.
Despite the concerning news flow, global markets remain positive year-to-date in GBP terms. Value, small-cap, emerging markets and commercial property have all delivered additional gains, offering helpful diversification. High-quality bonds have also held up well. This is what a diversified portfolio is designed to do: provide exposure to different sources of return so that no single event determines the outcome.
Figure 1: Market returns in 2026
Data source: see endnote. Returns in GBP to 04/03/2026.
Returns over the past few days – since the latest escalation – are, as expected, noisier. A handful of trading days during a geopolitical shock rarely provide meaningful insight. Markets are simply repricing risk as new information becomes available, and they will continue to do so.
Events such as these can tempt investors to question whether they should do something. The short answer is that they shouldn’t. Periods of market stress – whether caused by conflicts, pandemics, political upheaval or economic surprises – are a feature of investing, not a bug. They feel uncomfortable, but they’re expected.
The chart below demonstrating that “every year the market falls” is a powerful reminder. Even in strong years, intra-year declines are entirely routine. Falls of 10% or more happen with regularity. Investors who remain disciplined, diversified and patient have historically been rewarded with returns well above inflation over time. Volatility is not an anomaly; it’s the mechanism by which long-term returns are earned.
Figure 2: Every year the market falls
Data source: Albion World Stock Market Index. Returns in GBP from 01/01/2007 to 03/03/2026.
We don’t know how the conflict in the Middle East will develop, and the day‑to‑day movement of markets is no clearer now than at any other time – it is essentially a coin toss. What we do know is that a well‑structured, globally diversified portfolio is the best defence to deal with periods of heightened market volatility. Markets absorb new information quickly, meaning today’s prices already reflect the best collective view of the future. Trusting that process – rather than reacting to short‑term noise – has served long‑term investors well for decades.
Stay diversified, stay disciplined, and remain focused on long-term goals. Keep calm and carry on!
Past performance is no guarantee of future returns and the value of investments and the income from them are not guaranteed and can fall as well as rise. The returns from your portfolio will fluctuate over time. On encashment of your investment, you may not get back the full amount invested and could lose part or all of your capital. This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action
