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Markets remain volatile, despite relief rally

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​A small market relief rally on Monday following Iran’s 300-strong missile and drone strike on Israel at the weekend does not mean investors can sit back and relax, a veteran investment advisor has warned.

Markets braced for Israel’s response to the Iranian attack which further fuelled tensions across the Middle East. US stock futures pushed higher on Monday after the Dow Jones Industrial average had its worst week of the year last week.

Gold futures retracted a touch to trade at $2,360 an ounce, and oil prices were slightly lower.

“There seems to be an element of a slight relief rally because, so far at least, Israel’s Netanyahu appears to be following US President Joe Biden’s instruction not to retaliate and risk escalating the situation even further,” said Nigel Green, CEO of leading independent financial advisory and fintech deVere Group.

“However, this is not a time for complacency,” Green said, adding that the situation remains highly volatile and investors who are serious about protecting and growing their capital cannot just sit back and relax.

Besides the deeply worrying humanitarian crisis continues to grow, one of the main areas of concern for investors, is that the Middle East, including Iran, is home to a significant portion of the world’s oil reserves, making it a critical player in the global energy market.

The deVere boss explained that any disruption in oil production or transportation due to conflicts in the region will have profound implications for energy prices worldwide.

“We have already seen prices surge in recent weeks. The mere possibility of such disruptions often leads to volatility in oil prices, which, in turn, cascades into broader market fluctuations.

“For investors, especially those with exposure to energy-related assets, or industries sensitive to oil prices, such as transportation and manufacturing, these fluctuations represent a direct threat to their portfolios,” said Green.

Ripple effects

The ripple effects on financial markets could impact investor sentiment, corporate profits and consumer spending, as well as on inflation, as they affect the cost of goods and services throughout the economy.

Central banks closely monitor oil prices when formulating monetary policy, as changes in inflation expectations can influence interest rates and economic growth prospects.

“With, sadly, no end in sight for the tensions to cool significantly in the region, investors will be seeking refuge in sectors that are less sensitive to geopolitical risks or that may even benefit from such situations,” said Green.

“These are likely to include defence, energy, healthcare and infrastructure.”

Investors should conduct thorough research, diversify their portfolios, and consider their risk tolerance and investment objectives before making any investment decisions. Additionally, consulting with a financial advisor will provide personalised guidance based on individual circumstances and market conditions.

The deVere CEO concluded that, “while a short-term relief rally may offer temporary respite, the underlying risks persist, underscoring the imperative for investors to remain vigilant, diversified, and adaptive to safeguard and to build wealth.”