Tehran, Iran. Conflict in the Middle East has become a leading concern for investors amid fears of a power struggle in Iran and a prolonged regional war with consequences for trade, inflation and financial markets.
U.S.-Israel strikes killed Iranian Supreme Leader Ayatollah Ali Khamenei on Saturday, prompting Iranian retaliation against Gulf cities, flight halts by airlines and the suspension of tanker transits through the Strait of Hormuz.
Uncertainty over Iran’s succession and governance
Market participants cited uncertainty over what happens next in Iran, pointing to the complexities of the Islamic Republic’s ruling system, the ideological nature of its support base, and the power of its Revolutionary Guards.
Oil, inflation and safe-haven assets in focus
Analysts said the uncertainty complicates the outlook for oil prices, which had been rising for weeks and are now dependent on decisions by oil-producing countries and on how tanker passage through the Middle East is affected, with implications for inflation worldwide and the perceived safety of bonds previously considered havens.
“Middle East tail risks have increased. Markets will reprice from geopolitical shock to regime risk shock, prolonged conflict, not just retaliation, unless Iran says it wants to negotiate,” said Rong Ren Goh, a portfolio manager in the fixed income team at Eastspring Investments in Singapore.
Brent crude jumped around 8% on Monday and was up nearly 30% so far this year. Investors have already purchased U.S. Treasuries and gold as hedges for a variety of risks, including Middle East tensions and President Donald Trump’s erratic policies.
Gold had a record run last year and was up 24% so far in 2026, while the main U.S. stock index was up 0.5%.
Concerns about complacency and broader market vulnerabilities
Analysts said a larger risk is complacency in markets that assumed the fallout would be limited, as during last June’s “12-Day War” in Iran or during Russia’s numerous attacks on Ukraine, and dismissive of comparisons to Iran’s 1979 regime change.
“History argues strongly in favor of selling geopolitical risk premium when hostilities start,” Barclays analysts said in a note on Saturday. “What worries us is that investors have now learned this pattern and might be underpricing a scenario where containment fails.”
Barclays also cited existing concerns that could exacerbate a selloff if the conflict escalates, including worries about the artificial intelligence boom and private credit markets.
How are you adjusting your investment risk expectations as oil prices and regional tensions rise?