Rising Middle East tensions spur investors into action
The recent surge in tensions in the Middle East, spurred by separate attacks carried out by Iran-backed militants, is prompting investors to reassess strategies, affirms the CEO of one of the world’s largest independent financial advisory and asset management organisations.
Nigel Green of devere is speaking out following attacks which resulted in the loss of US troops in Jordan and the targeting of a fuel tanker in the Red Sea, which have intensified geopolitical risks.
He said, “The recent attacks have heightened uncertainty, leading to increased market volatility. Many investors are now pursuing a more cautious approach, with heightened risk aversion impacting various asset classes.”
Green said that the Middle East remains a crucial player in the global energy market, accounting for a significant portion of the world’s oil production.
“Disturbances in the region have a profound impact on energy prices. The attacks on a fuel tanker in the Red Sea have already triggered concerns among oil traders, prompting a reassessment of the risks associated with shipping cargo through the area.”
Rising oil prices could have a cascading effect on global markets. “Increased production costs for businesses, higher transportation expenses, and a potential drag on consumer spending are just a few of the consequences that typically reverberate throughout the global economy if oil prices are on the rise,” Green noted.
Investors in energy-related stocks and commodities also “experience increased levels of volatility.” Green said, “Should the recent events in the Middle East continue to escalate, we’re likely to see a flight to safety, with investors reallocating their portfolios to mitigate risks.
“This could lead to increased demand for traditional safehaven assets, such as government bonds, and certain currencies, such as the US dollar, influencing their prices and yields.”
According to Green, diversification strategies become even more critical during periods of heightened geopolitical tension. Investors will be reassessing their asset allocation to ensure a well-balanced and resilient portfolio across asset classes, sectors and regions.
Investors around the world will be monitoring the impact on global trade and supply chains, affirms the devere CEO. “Rising tensions can be expected to lead to increased shipping costs, delays, and potential disruptions in the flow of goods. This would particularly affect industries that rely heavily on just-in-time production and efficient logistics.”
Investors with exposure to international trade and logistics may closely monitor developments in the Middle East to assess the potential impact on their portfolios. Companies operating in or dependent on the affected regions may face challenges, while those with diversified supply chains may be better positioned to navigate uncertainties.
Should the recent events in the Middle East continue to escalate, we are likely to see a flight to safety, with investors reallocating their portfolios to mitigate risks NIGEL GREEN