The Iran-Israel conflict impacts markets globally, with immediate reverberations felt across commodities, equities, and currencies. Following a significant escalation on the night of 12 June 2025, the geopolitical shock has prompted fresh concerns for UK investors already navigating a volatile landscape.
A sharp escalation shakes global confidence
Missile strikes exchanged between Iran and Israel have reignited fears of a wider Middle East war. Although diplomatic efforts are underway, financial markets have already reacted. Oil prices surged by over 6%, gold rallied nearly 3%, and equity indices opened deep in the red.
Commodities: energy prices soar, gold shines
Oil spike raises inflation fears
With Brent crude climbing above $95 per barrel, the UK, a net importer of energy, faces a renewed inflationary threat. If elevated prices persist, the Bank of England may be forced to delay any planned interest rate cuts.
Safe haven rush boosts gold
As investors flee risk, gold has emerged once again as a refuge. The metal touched a record $2,420 per ounce — a familiar hedge during geopolitical turmoil.
Market volatility returns: equities fall, bonds gain
The FTSE 100 dropped 1.8% at the open, driven lower by travel, hospitality and technology stocks. Conversely, defence firms such as BAE Systems and oil giants like BP and Shell saw notable gains.
Meanwhile, UK government bonds (gilts) attracted buyers seeking safety. Ten-year gilt yields dipped slightly, despite ongoing inflation concerns.
Key risks for UK investment portfolios
- Equity market turbulence expected to continue
- Indirect exposure to emerging markets via global ETFs
- Sterling faces pressure amid rising global risk aversion
Navigating the uncertainty: what investors can do
While sharp reactions are understandable, seasoned investors know the value of long-term discipline. Several strategies could prove effective:
- Diversify across sectors and geographies
- Add defensive assets such as gold, infrastructure, healthcare, and defence
- Identify cyclical opportunities if the conflict remains contained
Tactically, energy-focused ETFs or defence and aerospace stocks may offer upside, though they come with added volatility.
Perspective matters: caution, not panic
History shows that markets often recover swiftly from geopolitical shocks, provided the crisis does not spiral. UK investors should remain composed, focused on fundamentals, and avoid rash decisions.
Sometimes, doing nothing is the most strategic move of all.
