The Middle East Conflict

The Clarion Investment Committee convened an ad hoc meeting on the 3rd March 2026 to discuss the conflict in the Middle East, the potential ramifications and whether the situation warranted any portfolio action.

Current situation

Heightened tensions in Iran have reintroduced geopolitical uncertainty to global markets. Investors had anticipated potential strikes on Iran, but the scale of the weekend’s operations and subsequent events was broader than expected.

Global equities have moved into a more cautious risk off mode. Initial market responses have been concentrated on higher oil and gas prices and strength in defence and value orientated exposures while broader equity market moves have remained relatively contained. The near‑term risks to supply routes and broader implications for oil and gas prices and inflation trends are key macro concerns. The death of senior political and military figures – including Supreme Leader Ayatollah Ali Khamenei – has prompted renewed scrutiny of the country’s internal stability and its potential impact on regional dynamics, particularly energy markets. Iranian strikes have targeted US bases and regional infrastructure while largely sparing oil production, even as tanker traffic through the Straits of Hormuz has almost ground to a halt amid reports of one tanker being hit and regional maritime war insurance being suspended.

Closing the Straits of Hormuz also closes off 90% of Iranian oil and gas exports and losing 85% of export revenues when the economy is already on its knees could well prove existential for the Regime who will need to be writing more cheques than normal to buy loyalty.

The situation underscores the importance of monitoring developments across the Middle East, where shifts in political leadership or security conditions often carry implications beyond the region itself. The focus remains on how prolonged instability could influence commodity pricing, safe‑haven flows and risk sentiment more broadly across emerging and developed markets alike.

Iran is clearly determined to inflict pain on its attackers even if it cannot win a conventional war. The Islamic Republic, though mortally wounded, is unpredictable and dangerous and the market reaction to a war that has suddenly expanded to include peaceable enclaves like Dubai has been a classic de-risking cycle with indiscriminate selling particularly in markets which have performed well recently.

President Trump has the Mid-Term elections coming up—he needs a deal, lower oil prices, and something he can sell to the US voters. Although extreme volatility can be uncomfortable, the current situation could soon present a buying opportunity.

The Clarion Portfolio Funds

Broadly the investment committee are comfortable with how the Clarion Portfolio Funds are positioned. Diversification is doing exactly what it is designed to do. The Portfolios are spread across different asset classes and regions which reduces reliance on any single country or theme. We have limited exposure to the UAE, and the broader Middle East so direct regional risk is contained.

For longer term investors the key risk during episodes such as this, is not short-term market movements, it is making reactive decisions. Knee jerk changes often result in selling after markets have fallen and missing out on the recovery that can follow quickly. Some of the strongest market days historically have occurred very close to the weakest days. Being out of the market during these rebound periods can materially damage long term returns.

The strategic financial plans constructed by your financial planner are not just built for calm, perfect conditions, they are also built to withstand uncertainty. The recent volatility in markets should not change long term objectives, time horizons, or income requirements. There is no reason to abandon a carefully constructed strategy because of short term geopolitical stress.

That said we are nor complacent. We have the flexibility to adjust positioning should risks broaden or fundamentals shift. If energy supplies were materially disrupted, if inflation pressures reaccelerated meaningfully, or if the conflict spread in a way that altered global growth prospects we would respond accordingly. At present though the Clarion Portfolios are performing as expected.

The most constructive course is discipline; stay diversified and stay invested. We will continue to monitor developments closely and keep you informed as necessary.

As always please get in touch with your usual planner if you have any concerns and/or questions.