Market Update: The regional conflict, and what to focus on as an investor

Over the weekend, the US and Israel launched joint strikes on Iran, resulting in the death of Iran’s supreme leader Ayatollah Ali Khamenei and other key officials. Iran has since retaliated against Israeli and US military installations across the region, and the conflict remains active.

It's a significant escalation, so we wanted to provide an update to help you cut through the noise and focus on what matters for your portfolio.

What markets are saying so far

Markets opened the week in risk-off mode, though sentiment steadied through Monday. Broad Asian equities fell around 1.6%, and the S&P 500 dropped as much as 1.2% before recovering to close flat. Brent crude oil prices surged roughly 8% higher to around US$78 per barrel, as investors priced in potential disruptions to the Strait of Hormuz.

Gold rose around 4% to above US$5,400 per ounce, reinforcing its role as a safe haven during periods of geopolitical stress. The US dollar also strengthened as investors moved to safety.

The Strait of Hormuz is at the centre of market concerns. The waterway is a critical oil route, through which roughly 20% of the global supply passes. Iran's Revolutionary Guard has warned ships against transiting the waterway, and shipping companies and insurers have suspended activity through the area.

The main risk for the global economy is a broader regional conflict that could result in a potential oil supply shock. It’s important to note, however, that this comes at a time when global oil markets are oversupplied, with prices trending down over the past two years.

While President Trump has said that there are "off ramps" in an interview with Axios, signalling openness to a diplomatic resolution, it remains too early to draw conclusions on how the situation will play out.

Putting it in perspective

History shows that geopolitical flare-ups drive short-term volatility, but the pattern tends to be similar: a spike as markets digest new information, followed by adjustment and recovery. The best days in the market often come right after the worst, which is why staying invested matters.

If you're already investing regularly through dollar-cost averaging, volatility can work in your favour. When prices dip, investing on a fixed schedule buys more. Over time, this smooths out your average entry price and removes the pressure of trying to time the market.

The broader macroeconomic backdrop has not fundamentally changed. Corporate earnings remain solid, and US growth remains resilient, with fiscal spending likely to spur activity through the first half of 2026.

(For more on this, read our 2026 Macro Outlook: Just the FACTs.)

What this means for you

Markets are likely to remain sensitive to developments in the days ahead, but the fundamentals of long-term investing won't change: diversification, discipline, and staying invested.

Portfolios concentrated in a single asset or region are more exposed to shocks like these. A globally diversified portfolio, like General Investing, is designed to absorb this kind of volatility, with exposure across equities, bonds, and gold as a defensive layer.

Uncertainty is uncomfortable, but ultimately, it’s moments like these when long-term investors have an edge. Staying invested tends to be more rewarding than trying to time an exit and re-entry. If you want to make it automatic, set up a recurring deposit on the StashAway app.