Since the outbreak of war, the situation in the Middle East has continued to escalate. The US and Israel are continuing their military operations, while the conflict is increasingly spreading throughout the region. At the same time, the Iranian leadership remains capable of acting for the time being. Against this backdrop, it can be assumed that the conflict could continue, as the US's next strategic steps are currently difficult to assess.
This development has not been without impact on the financial markets. The consequences are most noticeable in the energy market. The Strait of Hormuz, through which around 20 per cent of the world's oil is transported, remains virtually impassable. Israeli attacks on Iranian oil refineries have further exacerbated the situation, causing the price of crude oil to climb above the USD 100 mark.
However, such high prices are unlikely to last. At this level, oil reserves that were previously considered too expensive to extract due to higher production costs are once again becoming economically attractive. Accordingly, it is to be expected that production capacities in more cost-intensive regions will be expanded or decommissioned facilities reactivated. At the same time, longer and more expensive transport routes will once again become profitable. The oil price is likely to stabilise at a slightly lower level in the medium term.
The conflict also had an impact on the equity and bond markets. Global equity markets have fallen noticeably, with losses varying from region to region. While the US market has lost around 3 per cent since the beginning of the conflict, the rest of the global markets have lost around 8 per cent on average. Asian stock markets have been hit hardest, with some losing more than 10 per cent. On average, however, global markets are still trading at the same level as at the beginning of the year. Yields on long-term government bonds have risen by around 0.2 percentage points since the start of the conflict. It is noteworthy that the movements on the bond markets cannot be explained solely by higher inflation expectations, but are also a reflection of growing uncertainty about US fiscal policy.
The extent to which these price movements will affect inflation and global economic growth depends largely on the duration of the conflict. However, it is clear that higher energy prices are weighing on consumer purchasing power and dampening corporate investment appetite. This is particularly challenging for the US. US growth halved in the fourth quarter of 2025 and job growth was negative. The economic headwinds are not only blowing in North America. China and Germany, the world's second and third largest economies, have already been in a phase of economic slowdown for some time, and the increased energy prices are likely to further delay a recovery there.
Our cautious investment policy, with a lower weighting of US equities and a higher proportion of gold and Swiss real estate, is proving to be the right one in this difficult global economic environment and does not require any fundamental adjustment. Following the initial downturn on the markets, we recommend keeping calm, sticking to a long-term, well-diversified investment strategy and not resorting to activism.
We are closely monitoring further developments and will inform you promptly of any significant changes.
