Events in the Middle East remain fluid and may change rapidly. Nevertheless, we felt it important to provide a clear summary of what’s happened recently, what it could mean for markets, and how we are thinking about client portfolios.

The Ceasefire

On 8 April 2026, a conditional two-week ceasefire was announced between the United States and Iran. In practical terms, this included a pause in U.S. strikes and the reopening of the Strait of Hormuz (the Strait) – a key waterway through which roughly 20% of global oil supply normally flows.

The Strait is also an important route for fertiliser ingredients (including urea and sulphur). If shipping is disrupted, it can flow through not only to energy prices, but also to parts of the agricultural supply chain.

Markets reacted quickly to the ceasefire news. Oil prices fell by roughly 15% and global sharemarkets rallied around 2–3% as investors took some comfort from the easing in tensions. However,
uncertainty remains. Iran subsequently closed the Strait again, citing Israel’s missile attack on alleged Hezbollah targets in Lebanon as a violation of the ceasefire agreement.

Even if tensions ease and shipping resumes, the ceasefire does not remove the underlying supply risk. Shipping insurance costs remain elevated, military activity in the area remains high, and Iran has shown a willingness to restrict access through the Strait to influence negotiations.

Put simply, a ceasefire helps reduce risk incrementally, but the risk of a renewed supply shock and the associated market volatility remain meaningful while conflict risks in the region stay elevated.

Economic and Market Impacts

From an economic perspective, the main risk is a sustained lift in energy prices if oil supply is disrupted for an extended period.

Historically, markets can often absorb geopolitical events surprisingly well. Where markets tend to struggle is when there are sustained disruptions to global energy supply.

The table below sets out our current views in relation to the three main scenarios for the war from here, and the likely impact that each scenario will have on key economic factors and asset classes
commonly used in diversified portfolios.

Beyond oil, there is also an impact on fertiliser and industrial chemical supply chains. If urea and sulphur exports are disrupted, food and industrial production costs are expected to rise, which may keep inflation pressures broader than just fuel prices.

Portfolio Positioning and Risk Management

Overall, we believe portfolios should remain diversified across a wide range of return drivers. Over recent months, the Investment Management team have made modest adjustments to portfolios,
increasing diversification and marginally reducing exposure to growth assets (such as equities and listed property) in response to rising geopolitical uncertainty.

Key positioning themes include:

Quality Growth Exposure

We continue to hold select global technology and healthcare businesses that benefit from long-term structural trends including artificial intelligence (AI), technological innovation and ageing populations. This helps keep portfolios exposed to areas of the market with stronger structural growth drivers. Companies such as NVIDIA continue to report strong revenue growth, highlighting the current resilience of AI-driven investment.

Australian Market Exposure

Within Australian equities, exposure remains diversified across banks, resources and selected technology names. Resource companies provide a natural defence against higher commodity prices.

Defensive Anchors

Australian bonds and cash remain important stabilisers. They can help cushion portfolios during periods of sharemarket volatility.

Real Asset Exposure

Holdings in infrastructure assets and gold also provide protection against geopolitical shocks and inflation risks.

Overall, diversification across asset classes and regions remains a primary defence against geopolitical uncertainty.

Conclusion

While the ceasefire holds, it lowers the immediate risk of a major disruption to global oil supply. That said, the drivers of the conflict remain unresolved. With the Strait of Hormuz still a potential flashpoint, energy markets are likely to remain elevated and volatile. Consequently, we do not anticipate fuel prices and those of any other dependent commodity or service to return to pre-war levels in the near term.

The key question for markets is not simply whether the war continues, but whether the conflict leads to a sustained supply shock in global energy, fertiliser and industrial chemical markets. In the short term that would likely push inflation higher but could ultimately weigh on growth and lead to recession if the situation remains protracted. The ultimate outcome will be determined by events in the coming days and weeks.