Geopolitical uncertainty has been a consistent feature of the past 12 months and, as we move through 2026, it remains front-and-centre for markets. The details may have changed but many of the shocks that investors have had to absorb over the last year are still fresh in the mind.
That recent experience is shaping how investors respond to new developments, with market reactions often driven as much by perception as by the underlying events. When headlines and social media posts start to drive short-term reactions, sentiment can shift quickly and that is particularly true given the pace and unpredictability of political decision-making today – especially in the US.
Events in Iran are the latest example of how rapidly attitudes can change. The disruption around the Strait of Hormuz has reinforced concerns around energy prices, inflation and global supply chains. Economies reliant on Gulf energy imports, particularly across Asia and emerging markets, are most exposed but the impact is already being felt more broadly across Europe, the UK and the US.
Navigating market volatility
The question for investors is how to navigate this environment. The situation remains fluid – and now is not the time to make wholesale changes. History shows that market sentiment often recovers faster than economic fundamentals. Investors who make large portfolio changes during periods of uncertainty risk missing rebounds once conditions stabilise.
At the same time, of course, the risks should not be underestimated. The longer the Iran conflict persists, the greater the risk of further pressure on supply chains and inflation – and, ultimately, on businesses and consumers.
“There have been numerous seismic events over the last 20 years. Global equity markets have dealt with them and, in time, moved on.
Look beyond the current headlines. Many of the opportunities we were seeing before the recent volatility remain compelling.”
Rising energy prices are already adding uncertainty around the path of interest rates, while higher fuel and food prices are beginning to create political pressure, particularly in the US as November’s midterm elections grow nearer.
On the Iranian side, meanwhile, the domestic position is very weak with energy exports restrained, inflation and unemployment soaring and the Iranian rial at an all-time low. Given the economic damage a prolonged escalation would cause, both sides have an incentive to reach a negotiated settlement rather than allow the conflict to drag on.
Long-term perspective
Taking a broader view, there have been numerous seismic events over the last 20 years. Global equity markets have dealt with them and, in time, moved on.
For investors, it is important to look beyond the current headlines. Many of the opportunities we were seeing before the recent volatility remain compelling. Over 2025, diversification worked well, with regions such as the UK, Europe and Japan outperforming the US. That theme continued into early 2026, before being interrupted in March as commodity-exposed areas came under pressure.
Encouragingly, some markets have already recovered a significant portion of those losses in April to reach new highs – a useful reminder of how quickly sentiment can adjust once uncertainty begins to settle.
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Valuations remain one of the most important drivers of long-term returns. The US still accounts for a very large share of global indices and, at an aggregate level, appears expensive relative to history. There are still selective opportunities within the US – particularly in areas such as smaller companies – but we continue to see better value in other regions.
A similar theme is evident in fixed income, where the current environment continues to favour short-dated, high-quality credit. Yields remain attractive and these assets are less sensitive to interest rate movements than longer-duration bonds, which have been more volatile as inflation expectations have shifted.
Stepping back to look at the bigger picture, equity markets reflect the future earnings potential of businesses but, more than that, they reflect innovation, opportunity and entrepreneurship. That is what ultimately drives returns over time – regardless of the backdrop.
Times like these can of course feel uncomfortable but they also reinforce the importance of diversification, keeping an eye on valuations and staying focused on long-term objectives. Markets have a track record of moving through periods of uncertainty and should prove no different. The challenge, as ever, is staying disciplined enough to see it through.
Richard Warne is a senior portfolio manager at Copia Capital
