Markets saw some volatility this week as investors reacted to escalating tensions in the Middle East and ongoing economic data. Geopolitical events can cause short-term market swings, but history shows that markets usually stabilise as investors refocus on economic fundamentals like growth, earnings, and interest rates.
For this week’s pulse, we’re going to take a moment to comment on how events in the Middle East have impacted financial markets. This is a constantly evolving situation, so what you read here reflects the situation as of 12:00 GMT 13 March 2026.
Before we start: What this could mean for your day-to-day
Here’s a quick summary of the headlines that outline some of the knock-on effects of what a prolonged conflict might mean.
The fuel & bills effect: Regional tension spikes oil prices, which is important, as it's a direct link to higher costs at the petrol pump and potentially stickier energy bills at home. (This Is Money)
Shopping basket surcharge: Rerouting ships to avoid hotspots adds weeks to journeys and millions to freight costs. This eventually makes everything from electronics to your weekly food shop more expensive. (Retail Gazette)
Mortgage & interest rate link: If costs stay high, inflation becomes harder to "kill off." This makes the Bank of England less likely to cut interest rates, meaning those cheaper mortgage deals could stay out of reach for longer. (BBC)
When conflict erupts, and geopolitical events intensify, the reaction can be swift. Institutional investors try to assess potential impacts on global trade, energy prices, and broader economic stability. That uncertainty can lead to short-term volatility.
Energy markets tend to be particularly sensitive to developments in the region because of the Middle East’s importance to global oil supply.1 Even the possibility of disruption can influence prices and investor sentiment, and because energy affects all walks of life, the reaction is global.
As a result, stock markets have seen fluctuations over the last 12 days, reflecting a familiar pattern: geopolitical news triggering short bursts of market movement.
Why markets often react this way
Financial markets are forward-looking and like certainty. When unforeseen events occur, whether it’s conflicts, elections, or diplomatic developments, this can make the economic outlook suddenly unpredictable.
In the short term, this presents itself as volatility in our investments.
But historically, markets tend to process these events relatively quickly. Once the immediate uncertainty fades or events become clearer, investors usually shift their attention back to economic fundamentals like corporate earnings, growth forecasts, and central bank policy.2
Volatility is part of the investing journey
While it can feel unsettling, volatility is a completely normal part of investing.
Even in strong market years, markets regularly experience temporary dips or fluctuations. These moments often reflect the market adjusting to new information, such as shifting interest rate forecasts, unexpected corporate earnings reports, or sudden geopolitical developments like we’ve seen this week.
Importantly, many geopolitical shocks in the past have caused short-term market reactions but had limited long-term impact on global equities.3
For long-term investors, these periods are simply part of the journey.
Keeping perspective as an investor
When headlines dominate the news cycle, it can be tempting to react quickly. But long-term investing usually benefits from staying focused on the bigger picture.
Market history shows that reacting to short-term volatility can sometimes do more harm than good. Instead, many investors focus on maintaining a diversified portfolio and continuing to invest consistently over time.4
This approach helps smooth out the ups and downs that naturally occur in markets.
Final thought
While global events can influence markets in the short term, long-term investing is about staying committed to your goals, through both calm and uncertainty.
Ultimately, your portfolio should be centred on the future, not the news cycle. By staying consistent and zooming out, you’re ensuring that when the dust settles, your long-term financial plan is still on track.
Stephen.
Source:
1International Energy Agency (IEA) 2Vanguard 3J.P. Morgan 4Fidelity
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than your original investment. Past performance is not a reliable guide to current or future performance, and should not be the only thing you consider when selecting a fund. The value of investments that are not in pound sterling may be affected by changes in exchange rates.
Important to know: When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than your original investment.
1Tax treatment depends on individual circumstances and may be subject to change in the future.