Initial impact of the US-Iran conflict

Thursday 5 March 2026

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In light of the events over the weekend (and continuing as we type), we felt it was worth giving a quick update on our thinking,

The United States and Israel launched coordinated military strikes against Iran, targeting missile infrastructure, air defence systems and senior political and military leadership.

Iran has responded by attacking US assets in the region and its direct neighbours. The Straits of Hormuz through which a fifth of global oil production and a fifth of global Liquified Natural Gas (LNG) pass is effectively closed to tanker traffic. However, unlike prior oils shocks many countries have significant reserves of oil and there is spare production capacity in other countries. The situation for LNG, which after coal is the main fossil fuel used in electricity production is not so robust with generally lower storage and less spare production capacity.

Accordingly, the price of oil, which had already been edging higher has risen by c. 14% since Friday whilst the price of LNG has increased by c. 60%. For reference European Gas prices increased by c. 390% following the Russian invasion of Ukraine. The majority (c. 80%) of the Gulf’s LNG production goes to Asia.

These price increases are inflationary, however the full impact will be determined by the duration of the war and we doubt that any of the protagonists know what the end goal is and when hostilities will cease.

Inflation is bad for bonds as it devalues future dividend payments. The CW portfolios have a defensive positioning with lower maturities and holding investment grade corporate bonds shielding portfolios from significant impact.

With regard to Equities, Asia and Emerging Markets have been most affected to date by these events. Whilst our portfolios were overweight going into this conflict, this has been positively counter-balanced by our general under-weight equity exposure and defensive position.

History has repeatedly shown that staying invested has usually been the most sensible option for long-term investors and with no clarity over the short term, we have decided to make no changes to the portfolio at this time, but will continue to monitor the situation closely.

If you have any questions at all, please do not hesitate to contact us on investments@cavendishware.co.uk or through your Adviser.