How Should Investors React to the Iran Crisis?

Earlier this week, a flurry of diplomatic activity produced a tentative ceasefire between Iran, Israel and the United States. It is unclear whether this is just a pause, or a step towards a lasting peace. My heart wants to be optimistic, but my head is telling me to expect further escalation. The geopolitical factors which produced the conflict are deep and protracted. The US has their 15-point peace plan. The Iranians have a 10-point plan. By my maths, that’s 25 points of disagreement... although I could be wrong.

If fighting resumes, it is worth remembering that many countries were already staring into the economic abyss. Governments in Sri Lanka and Slovenia limited fuel and energy use, with quotas per vehicle and electricity rationing. I had a strange sense of déjà vu, of 2020, when I watched a wave of Covid surge through China and Italy, before eventually washing over the world like a tsunami. When the Iran conflict started, I wondered how long it would take before the crisis hit the UK.

The Iran crisis was playing out like a repeat of 1973, when the Yom-Kippur war resulted in high energy prices, fuel shortages and power cuts. Wage disputes and industrial action exacerbated...