Upside risks to this view include:

• Oil markets remain well supplied, and Saudi Arabia has agreed to increase production in support of lower prices. At the same time, a geopolitical risk premium was already embedded in oil prices prior to US action.

• Regional responses within the Middle East suggest increased alignment with the US, rather than pressure to de-escalate.

Investment Implications

Equities:

• The rotation toward international and value‑oriented equities has continued.

• Within this, European equities face greater uncertainty given elevated natural gas prices.

• Support remains for US AI‑infrastructure beneficiaries as well as emerging‑market equities.

• The backdrop may also favor a shift from oil exploration and production toward higher‑quality integrated energy companies.

• Gold equities, meanwhile, offer catch‑up potential relative to bullion.

Fixed Income:

• Recent bear flattening² reflects concerns about sticky inflation and reduced expectations for rate cuts.

• That said, long duration³ may become more attractive if yields rise further, particularly if AI‑driven productivity helps temper inflation.

• In credit, a more defensive posture in investment grade may be warranted given tight spreads⁴ and expected issuance.

Commodities:

• Consider maintaining long exposure to gold, with greater upside potential in gold equities.

Overall, investors across asset classes may do well to remain focused on underlying fundamentals beyond the conflict, including AI-driven growth, rotation into real assets⁵ and international equities, and opportunities in private credit.

US-Iran Conflict: Risks to Watch
Thomas Mucha, Geopolitical Strategist

The confirmed death of Supreme Leader Ayatollah Ali Khamenei, along with other senior regime figures, injects significant uncertainty into the outlook, spanning Iranian military capabilities and cohesion, as well as broader questions around regime stability and succession.

Regional risks remain highly elevated. From a market perspective, energy infrastructure and key shipping lanes are critical areas to monitor. Iran’s president and Iranian Revolutionary Guard (IRGC) leadership have vowed retaliation, while President Donald Trump has said US and Israeli attacks will continue “throughout the week or as long as necessary to achieve our objectives of peace throughout the Middle East and, indeed, throughout the world.”

Taken together, these developments point to further military action, alongside sustained macroeconomic and market risks.

Three Key Developments to Monitor

• Iran’s Military Response and Target Selection – Iran resumed retaliatory missile and drone attacks on March 1, signaling continued military capabilities despite leadership disruption. A broader target set raises the probability of sustained and widened regional conflict, including attacks on civilian infrastructure, economic targets, or cyber assets.

• Energy Infrastructure Risk – Watch for confirmed attacks on, or credible threats to, Iranian oil and gas facilities as well as Gulf energy infrastructure.

• Shipping and the Strait of Hormuz – Risks include harassment of commercial shipping, mining activity, rising insurance costs, rerouting, or sustained slowdowns.

Additional Factors Shaping the Outlook

• Duration and Tempo of Military Operations – Do US and Israeli strikes slow following initial battle-damage assessments, or shift from days to weeks, signaling incomplete degradation of Iranian capabilities?

• Proxy Activation and Engagement – Watch for responses from the Houthis, Shiite militias in Iraq and Syria, and Hezbollah in Lebanon.

• US Force Posture and Exposure – Focus on force-protection measures for the roughly 40,000 US personnel in theater, watching for evidence that forces are being dispersed to reduce risk, as well as any successful Iranian strikes on US military assets.

• Gulf Cooperation Council “Pull-in” Indicators – Monitor missile interceptions or other impacts on Gulf states hosting US forces, including the scope and duration of airspace closures or defensive operations.

• Diplomatic Signals vs. Rhetoric – Prioritize actions over statements to assess whether and when diplomatic efforts resume.

• Iranian Domestic Political Response – Look for mass protests, visible regime support, and the IRGC’s capacity to suppress dissent.

• US Domestic Political Reaction – Monitor polling trends and Congressional responses.

• Great-Power and Allied Responses – Assess whether China or Russia move beyond rhetoric and what US allies’ reactions suggest about the durability of US security relationships.

• Risk of Mission Creep – Evaluate whether expanded US engagement in the Middle East reduces capacity or attention on other priorities, including Venezuela, Cuba, or the upcoming US-China summit in Beijing.

In the near term, markets should focus less on headlines and social-media commentary and more on observable signposts, particularly Iranian targeting decisions and regime-military cohesion, risks to energy infrastructure and shipping, and whether the conflict is finding a ceiling vs. drifting toward a more prolonged campaign.

Over the longer term, the broader context matters. This ongoing and seismic development reflects a wider shift in the global geopolitical environment and is likely to accelerate fragmentation and conflict, reduce policy cohesion, and further entrench national security as a dominant global policy priority.