How Wall Street Strategists Plan to Navigate Markets Amid U.S.-Iran Conflict

It's been a volatile few days for markets following the US strikes in Iran over the weekend. Oil prices have jumped and safe haven assets like the US dollar have rallied. Stocks have recovered somewhat, but more uncertainty lies ahead. Here's what Wall Street strategists are saying about how investors should be positioning their portfolios. Analysts at Morgan Stanley looked at how markets have behaved during past moments of geopolitical turmoil. Historically, events like the start of the Vietnam War, the war in Afghanistan, the war in Iraq has led to short-term volatility in stock prices. But that has proven to be short-lived. According to the bank's analysis of 22 separate events, stocks have actually been up on average 1 3 6 and 12 months afterwards. The bare case is that the conflict in the Middle East drags on for longer than expected. that could cause oil prices to rise and stay elevated, leading to fears of inflation. Higher inflation due to surging energy prices would reduce the likelihood of interest rate cuts by the Federal Reserve, currently expected for later this year, according to Adam Het's global head of multi-asset at Janice Henderson. That's what happened after the start of the Russia Ukraine war in 2022, which caused a more sustained market sell-off. Iran is only responsible for about 3 to 4% of global oil supply. But the conflict has essentially led to the closure of the strait of Hormuz, an important passageway from the Persian Gulf states that about 20% of global oil goes through. Strategists say the market is currently pricing in a relatively short-lived conflict. Oil would have to climb above $100 a barrel, well above where it stands now, for the downside scenario to play out. For most non-professional investors, strategists and advisers say that having a diversified portfolio and sitting tight is the best course of action. For those looking to take a more defensive posture, analysts at Morgan Stanley recommend giving added weight to health care, which they see as undervalued and more defensible from risks around artificial intelligence. Strategists at Wells Fargo go even further, arguing that history suggests geopolitical dips should be bought. In other words, it could be a good time to load up on stocks.

As the conflict in the Middle East causes uncertainty in the markets, WSJ’s Miriam Gottfried explains what Wall Street strategists recommend when it comes to your portfolio. #Iran #Markets #WSJ