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Investments

Markets and the Middle East

Recent geopolitical developments in the Middle East have contributed to market volatility, and many savers and investors are watching closely to understand what this means for the wider economy. At Royal Bank, we monitor these shifts carefully to help customers stay informed, especially in periods of uncertainty.

Over longer periods of time (five years or more), investments such as stocks, shares and funds have the potential to give you higher returns compared to cash savings. But the value of investments can fall as well as rise. There is a chance you may get back less than you put in. Eligibility criteria, fees and charges apply. Past performance is not an indicator of future performance and should not be relied on as such. You should continue to hold cash for your short-term needs.

Key points

  • The market reaction

Recent conflict in the Middle East has created short‑term volatility, with oil prices rising and gold becoming attractive as investors seek traditional safe‑haven assets.

  • Putting events into perspective

Historically, markets tend to recover after geopolitical shocks, and volatility is a natural part of long‑term investing.

  • Our investment fundamentals

Diversification by holding different assets such as gold, could provide resilience. Focusing on robust data, our investment decisions remain based on fundamentals, not headlines.

What this means for the broader economy

Interest rates and inflation

Rising oil prices can place upward pressure on inflation, which influences the Bank of England’s decisions on interest rates. While interest rates have remained higher for longer to manage inflation, any changes in global energy markets can play into how quickly the UK moves toward a more stable rate environment.

The UK economic picture

Despite global uncertainty, the UK has shown signs of resilience. Recent data has pointed to steady consumer spending, moderating inflation and early indications of improving business confidence. These factors all contribute to shaping opportunities for long‑term savers and future investors.

Investment perspectives

Our investment specialists at Coutts—who support Royal Bank with economic insights—continue to focus on fundamentals rather than headlines. Diversification, including assets such as gold, can help provide resilience in times of geopolitical tension.

We also see potential in areas such as emerging markets, particularly in fast‑growing, technology‑driven economies like South Korea and Taiwan. These regions may benefit as the global business cycle moves toward expansion.

How we’re monitoring the situation

We continue to track developments closely—especially anything that could influence energy supply, inflation or global growth trends.

It is important not to let the gravity of geopolitical events distort investment judgement. As the team at Coutts who manage Royal Bank investments wrote in a recent Coutts CIO Weekly, “geopolitical upheaval can come at a very heavy price for the individuals and populations involved. However, in modern history, geopolitical flashpoints have rarely had a lasting impact on financial markets.”

Since 1956, we have identified 42 major geopolitical flashpoints. Despite the immediate uncertainty each one created, US equity markets – often seen as the engine for global growth – have, on average, posted positive returns of +5.4% in the six months following the event.