New Delhi, March 4: The ongoing conflict between Iran and Israel has led to instability in global financial markets in recent days. Amid falling stock prices, investors are turning to safer options like gold and silver. Additionally, crude oil prices have surged as the Strait of Hormuz, which accounts for nearly 20% of global energy supply, has remained effectively closed for the fourth consecutive day.
Air travel in the Gulf region has also been impacted by the attacks. Major airports in Dubai and Doha halted operations over the weekend, leading Emirates, Etihad Airways, and Qatar Airways to suspend most flights.
Analysts believe that geopolitical uncertainty may continue to cause fluctuations in the market in the coming days.
UBS, a global investment bank, asserts that the disruptions in energy supply will be temporary. Once it becomes clear that the supply issues are not permanent and that critical oil infrastructure remains intact, oil prices may partially rebound from their initial surge.
Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, noted in a report that while market volatility may persist in the coming weeks, investors will eventually refocus on the positive fundamentals of the global economy. Historically, most geopolitical shocks have had limited long-term impacts.
According to UBS, panicking and reducing risk in portfolios during such times has generally not been profitable. The bank advises investors to maintain a long-term perspective, stay invested in broad equity indices, and diversify their portfolios during market downturns.
Although the stock market may face pressure in the early stages of military tensions, UBS believes that the strength of the U.S. economy, robust corporate earnings, and increased government spending globally could lead to a potential market rise of about 10% by the end of 2026.
The bank anticipates growth not only in the U.S. but also in Europe, Japan, China, and emerging markets. In the Asia-Pacific region, China—especially its tech sector—along with India, Australia, and Japan are expected to drive the next upswing.
UBS is optimistic about the commodity markets in 2026, particularly in precious metals. Given the rapidly changing circumstances in West Asia, the bank believes that actively managed commodity strategies could be more beneficial.
The bank recommends that a small portion of total assets (around a few percent) be invested in gold to diversify portfolios and hedge against geopolitical risks. Additionally, quality fixed income and hedge fund options may help reduce portfolio volatility.
UBS warns that if oil prices rise sharply, inflation may increase, prompting major central banks to consider raising interest rates. However, in recent years, central banks have indicated a reluctance to react strongly to temporary inflation spikes.
The bank believes that high oil prices place an additional cost burden on consumers and companies, potentially resembling a tax increase. However, oil markets typically self-correct, as supply increases when prices rise. Therefore, UBS does not foresee a long-term impact on economic growth from temporary spikes in oil prices.
Nonetheless, if high prices persist, they could negatively affect oil-importing economies, though this impact is expected to be limited and may diminish over a few years.
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