Macro impact: The Iran conflict and risks to the Strait of Hormuz do not yet warrant a major change to our base case macro outlook. Growth adjustments remain limited, inflation has nudged higher, and central banks are broadly in a wait-and-see mode, with policy rates expected to remain largely stable. However, Europe is more vulnerable to this type of shock, as it faces stronger headwinds from potentially higher inflation and weaker growth. This crisis may further hasten the EU on its path towards strategic autonomy and green energy. 

Geopolitical angle: The US and Israel are pursuing core ‘must haves’ by degrading Iran’s military, missiles, and nuclear capabilities, while regime change remains a secondary ‘nice to have’. The key signpost to watch is whether people will take to the streets and if militias will try to seize the opportunity to overthrow a weakened regime.

Investment implications: This is a time for balance, not indiscriminate ‘buy the dip’ or risk aversion. Risk allocation should be diversified and selective, avoiding areas most exposed to leverage, inflation shocks, and AI-driven disruption.

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