Global markets are reeling from the escalating Iran-Israel conflict in West Asia, with stock indices plunging and investors flocking to safe havens like gold and silver. Crude oil prices have surged as the Strait of Hormuz, through which 20% of world energy supplies pass, remains effectively closed for the fourth straight day. Air routes in the Gulf region are disrupted too, with major airports in Dubai and Doha halting operations over the weekend. Airlines such as Emirates, Etihad, and Qatar Airways have canceled most flights.
Analysts warn of ongoing volatility due to geopolitical uncertainty. However, UBS Global Wealth Management’s Chief Investment Officer Mark Haefele offers a measured perspective in a recent note. He argues that energy supply disruptions will prove temporary. Once it’s clear that key oil infrastructure remains intact, oil prices could retreat from their initial spike.
Haefele emphasizes that historical precedents show most geopolitical shocks have short-lived impacts. Investors who panic and de-risk portfolios during such events often miss out on recoveries. UBS recommends maintaining a long-term view, staying invested in broad equity indices, and using market dips to diversify further.
Despite near-term stock market pressure from military tensions, UBS sees upside potential. Strong US economic growth, robust corporate earnings, and rising global government spending could drive markets 10% higher by end-2026 from current levels. Gains are expected across the US, Europe, Japan, China, and emerging markets, with Asia-Pacific leaders like China (tech sector), India, Australia, and Japan poised to spearhead the rally.
Commodities, particularly precious metals, are tipped for strong performance in 2026. UBS suggests actively managed commodity strategies amid West Asia’s fluid situation. Allocating a small portfolio portion (a few percent) to gold can hedge geopolitical risks and enhance diversification. Quality fixed income and hedge funds can also dampen volatility.
If oil prices stoke inflation, central banks might hike rates, though recent trends suggest measured responses. High oil costs act like a tax on consumers and firms, but markets typically self-correct as supply ramps up with prices. UBS doubts temporary oil spikes will derail long-term growth, even if prolonged high prices pressure oil-importing economies—the impact would be limited and fade over years.