Summary
In this Investment Talks we explore the potential implications and the main take-aways for investors after the Israel's strikes on Iran.
Key points
After four days of exchanging attacks, Israel and Iran continued to defy international calls for de-escalation as the conflict between the two regional powers intensified. The situation is evolving, and the risk of escalation remains high. However, we expect the main theatre of conflict to not escalate beyond the region.
The attack pushed oil prices higher last Friday, introducing additional uncertainty and risks to global economic growth while exacerbating inflationary pressures. With the diplomatic route still open and oil infrastructure less likely to be the main target, we maintain our Brent crude oil target at $63 per barrel by the end of 2025 and $68 by the end of 2026, as actual damage to supply capacity appears limited. Although we do not expect a blockade of the Strait of Hormuz, it remains a critical factor to monitor due to its potential impact on oil prices and global supply stability.
As we have emphasised over the past years, geopolitical risks have intensified globally, making it key to analyse possible scenario developments. In the short term, we believe this escalation could trigger some profit-taking after the recent strong performance of risky assets. These developments also reinforce the need to maintain a well-diversified stance with hedges in place and exposure to commodities.
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