2 October 2024 – Global markets are on edge as they asses the sudden escalation in Middle East tensions, but investors are being urged to remain calm, stay invested, and ensure their portfolios are diversified.
Iran’s missile strikes against Israel, in retaliation for the killing of Hezbollah leader Hassan Nasrallah, have heightened fears of a broader regional conflict.
MSCI’s global equities index registered losses on the news.
Nigel Green, the CEO of deVere Group, one of the world’s largest independent financial advisory and assert management organizations, says: “With Israel pledging a strong response, the risk of further instability is increasing volatility across global markets.
“Geopolitical uncertainty in the Middle East, a critical hub for global energy production and trade routes, is a well-known trigger for market disruption.”
“In the immediate aftermath of the attacks, investors are seeking safer assets in a flight to safety, as they re-evaluate risk in light of potential further escalations.
“The dollar index is up, and gold surged about 1%, as investors shift away from riskier assets such as stocks and emerging market equities,” affirms the deVere CEO.
“Yields on US Treasuries and other government bonds are likely to fall as demand increases, pushing prices higher. US Treasuries, in particular, are seen as one of the safest places to park money during times of geopolitical turmoil, and this trend is expected to continue as tensions flare.”
Global stock markets are expected to face increased volatility in the coming days as the situation evolves.
“Key sectors that are highly sensitive to geopolitical risks, such as energy and defense, can be expected to heightened activity. Oil prices have already begun to rise – up by around 3% – driven by concerns about supply disruptions from the Middle East, which could have significant ripple effects on inflation and economic growth.”
However, this initial turbulence does not mean investors should panic.
Nigel Green continues: “While markets may experience temporary turbulence, history teaches us that such geopolitical shocks are often short-lived, with prices stabilizing as the situation becomes clearer.
“Reacting emotionally and making impulsive decisions during market swings can be detrimental to long-term financial goals. Selling investments in the heat of the moment locks in losses and prevents investors from benefiting from eventual market recoveries.”
Instead, he notes, it’s important to maintain perspective.
“Volatility is a normal part of investing, and while geopolitical crises can shake markets in the short term, the long-term upward trend of the market has historically prevailed. Staying invested through periods of volatility ensures that investors are positioned to benefit when stability returns.”
A key strategy for managing the risks of geopolitical volatility is diversification. By spreading investments across different asset classes—such as stocks, bonds, commodities, and currencies— as well as sectors and geographies, investors can mitigate the impact of any single event on their overall portfolio.
While geopolitical events such as these may lead to short-term volatility, the best course of action is to focus on the long term.
“Investors who maintain a disciplined approach to their portfolios, ensure proper diversification, and avoid emotional decision-making are more likely to emerge from periods of uncertainty with their financial goals intact,” comments the deVere Group chief executive.
A calm and measured approach to investing- staying invested, staying diversified, and focusing on long-term goals – will be crucial for navigating the current situation.
“Global markets will be rattled by developments between Iran and Israel. But seasoned investors know the drill: keep calm, stay invested, trust your diversified portfolio – and it should be just that – to do its job.”
deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of offices around the world, more than 80,000 clients, and $12bn under advisement.
