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To manage risks associated with the ongoing Middle East conflict, UBS analysts recommend a strategy focused on diversification and targeted asset allocation. Despite concerns over the recent escalation between Israel and Hezbollah, global market impact is currently contained. However, further escalation involving Iran and the U.S. could disrupt energy supplies and increase financial volatility.
Diversified portfolios are crucial to mitigate individual risks while capitalizing on supportive macroeconomic conditions, according to UBS analysts. Given the potential impact on oil supply routes like the Strait of Hormuz, exposure to oil-related assets can act as a hedge against energy disruptions. Although oil prices have remained stable, a significant disruption could lead to prices exceeding USD 100/bbl.
UBS also suggests including gold in portfolios during geopolitical tensions, as gold prices have seen a significant increase this year. Gold serves as a safe haven asset during market uncertainty and offers stability within diversified investment portfolios. Additionally, maintaining exposure to high-quality credit assets can provide stability amidst market volatility.
While the conflict has weakened the Israeli shekel and affected the country’s fiscal outlook, global markets are advised to focus on broader economic drivers as long as the conflict remains contained within the region.
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SOURCE
Emma Collins, graduated in Financial Economics from the University of Chicago in the USA in 2016. She has since worked at an asset management firm in New York, where she specializes in investment strategies and portfolio management. Emma has a keen interest in financial analysis and has published several articles in renowned financial journals. Her work focuses on providing actionable insights to investors, and she is known for her forward-thinking approach to managing financial portfolios.
