WeeklyWatch – Iran conflict creates uncertain market pathways

10^th March 2026

Stock Take

Iran conflict causes markets to fall

It’s been just over a week since the US and Israel launched their latest campaign against the Iranian regime, and investors are continuing to try to get their heads around the repercussions.

Some key questions they find themselves asking are:

• How long will the current situation last?
• What’s happening or will happen in the Strait of Hormuz (a key area in the global flow of energy)?
• What will Iran look like once the dust has settled?

The answers to these questions will inevitably have massive ramifications, both for the global economy and investment markets.

One particular resource that wasted no time in reacting was oil. Since the Friday preceding the attacks, the price of oil has increased from $72.5 per barrel to a peak of $119 (at the time of writing the price has fallen to $104). Iran have since been targeting energy production facilities in neighbouring nations, indicating that the conflict is set to continue, and with it, further increases in the price of oil.

The impact has been felt in other areas too – notably, flight prices. Additionally, fertilisers, which need a lot of energy to produce, have significantly increased in price. The shock to fertiliser prices is likely to have a knock-on effect on food prices down the line.

Overall, this will cause more inflationary pressure for the global economy, putting extra pressure on central banks seeking to reduce interest rates. In the UK, the odds of an interest rate cut happening in March fell from 74% before the crisis to 11% at the beginning of this week. But the Bank of England still have time to make their decision, so much could change before 19^th March.

The longer the conflict persists, the more these pressures will intensify.

How have the markets reacted?

While the future remains shrouded in uncertainty, and inflationary pressures continue to increase, it’s fair to say that the markets faced a challenging week! The FTSE 100 and European STOXX 600 finished the week down 5.74% and 6.11% respectively. A similar pattern continued into this week – the FTSE 100 fell 1.85% in the opening hours of trading and the STOXX 600 fell even more.

However, the US – as a net energy exporter and therefore more insulated from these pressures – was less affected by the Iran conflict.

It was a case of changing fortunes for ‘safe haven’ assets. Last Monday, there was a quick flocking for safety to defensive assets like gold and US treasuries. As the inflationary implications of the war became clearer, more turned their attention to these, which caused bond yields to rise.

The Equity Strategist at St. James’s Place, Carlota Estragues Lopez, explained the market behaviour, saying:

“Despite the escalation of the conflict, market reaction until recently had been relatively contained. Equities softened, bonds sold off, the dollar strengthened and energy prices rose but moves initially looked orderly.
“Investor behaviour suggested profit taking rather than outright de‑risking, with many drawing comfort from historical experience that geopolitical shocks rarely leave a lasting imprint on asset prices. There has also been a widespread belief that the conflict will be contained, energy supplies will normalise, and that the US remains relatively insulated from a sustained energy shock.
“However, this calm may be misleading. While oil and gas prices remain below crisis extremes, a prolonged disruption to energy supplies would have significant implications, particularly for Europe, emerging markets and parts of Asia. Markets currently appear priced for a short‑lived shock, not a sustained one, raising the risk that both bonds and equities could come under pressure simultaneously if tensions persist.”

Conflict shockwaves in Asian markets

The market ramifications have been felt much more strongly across the Asian markets than Western markets. The Nikkei in Japan fell by over 7% at the start of the week and there were even bigger falls in South Korea – all on the back of significant falls in the previous week. Approximately 90% of all oil for the Far East is carried through the Strait of Hormuz, meaning it’s more vulnerable to disruption.

The timing falls in line with China starting to release details of their 15th five-year plan, covering the years 2026 to 2030. Many details are still to be released, but the annual growth target for 2026 has been publicly revealed: 4.5%–5%, compared to 5% achieved in 2025. This is the lowest level targeted since 1991.

However, lowering the target isn’t all bad. It can be seen as more of a recognition that the Chinese economy is more mature now. The nation is recording historic trade surpluses, it’s world-leading in many fields when it comes to their high-tech sectors, and the population has started to shrink – meaning there’s less space for it to grow.

US jobs take a hit

Despite their equity markets not suffering as much of an impact from the Iran situation, the US still experienced a disappointing payroll release on Friday. It was expected by economists that 55,000 non-farm jobs would be added to the US economy in February. Jobs actually fell by 92,000, according to the US Bureau of Labor Statistics.

As a result of the drop in payroll numbers, unemployment figures were also affected, rising from 4.3% to 4.4%. However, it must be remembered that February’s figures were affected by a healthcare strike which would have reduced the total number; this same strike will serve as a boost to March’s numbers. Figures were also impacted by prior revisions.

With investors already feeling unnerved by the current state of the world, lower numbers like these meant that US equities concluded the week on a downward note.

Wealth Check 

Government encouraged to limit powers under Pension Schemes Bill

Pension industry groups are coming together to urge the government to remove their mandating power from the Pension Schemes Bill before it becomes law.

The bill is currently in report stage in the House of Lords and grants the government significant power to direct how pension schemes invest savers’ money and target different asset classes.

The government have said they intend to include a reserve power in order to support the Mansion House Accord. This is a voluntary agreement where the largest workplace pension providers invest at least 10% of their default funds into private markets by 2030 – at least 5% will be allocated to UK private assets.

In its current form, the bill gives the government greater powers to direct the way in which workers’ pensions are invested by pension schemes.

The broader aims of the bill have been welcomed by the Association of British Insurers and Pensions UK. The hope is it will simplify workplace pension saving for millions of employees, offer access to a large range of assets for investors and result in better value over the long term. But they’ve warned that the bill could create risks that undermine the confidence of pension savers.

They’ve proposed the following amendments to the bill:

• Cap the percentage of investment that can be mandated, in line with the 10% and 5% targets outlined in the Mansion House Accord
• Limit the government’s scope to their stated intention and purpose
• Impose a deadline on any minimum asset allocation

If it receives approval in the House of Lords and Royal Assent, the bill will become law in the middle of 2026.

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SJP Approved 09/03/2026