Published 20 April 2026
Stock markets around the world fell following the strikes (which started early March) but have recovered some of the lost ground since then. It is a period where the ‘story’ changes day-to-day and markets are volatile (larger than normal ups and downs).
A short-term cease fire is in place, but by no means is the conflict resolved. Following the initial attacks, stock markets fell sharply but talks between the US and Iran have commenced and Trump has not followed through on threats to widen the conflict and target energy and transport infrastructure.
It’s important to remember that most stock markets are still near their highest-ever levels. The UK stock market (FTSE 100 Index) has fallen from its peak of 10,934 (Feb 27 this year) but remains well ahead (10,598) of where it started the year (9,931).
Are these attacks different from before, when the US and Israel launched attacks against Iran in June last year?
The US and Israeli attacks of last year were focused on nuclear sites. This time, the targets have been military facilities with an intent to ‘wipe out’ Iranian military capabilities, something the US says has largely been achieved. The country’s leadership was also targeted, including the killing of Ayatollah Ali Khamenei early on, and the deaths of other senior officials.
We referenced before that there was desire (US and Israeli) for regime change. Trump telling the Iranian public it was ‘now or never’ and that ‘help is coming’. So far, the Iranian regime remains intact. The naming of Ali Khamenei’s son as the new supreme leader was an act of defiance, and the US are seemingly negotiating with the powers that be. Regime change seems unlikely, and the rhetoric is returning to nuclear capabilities, which the US had told the world had been ‘obliterated’ last year.
Whilst it is not clear how the conflict will be resolved, the US are unlikely to stop until they can present some kind of victory, and that will likely be linked to degradation / elimination of Iran as a nuclear threat – which is to all intense purposes, where we were last year.
The market reaction
The world’s markets have been volatile because of the uncertainty this brings. What we do know is that energy prices are rising due to the effective closure of the Strait of Hormuz, through which 20% of the world’s oil and gas is transported. Higher energy prices (oil went through the $100 a barrel mark, but has since fallen to $95 at time of writing) means higher inflation, and that means central banks will be forced to delay further interest rate cuts. We have already seen the US Federal Reserve and UK Bank of England maintain interest rates through March, when markets had previously been expecting a cut.
Stock markets up until the attacks in March had been performing very strongly. A part of this, beyond the excitement around AI, was the expectation that interest rates would continue to fall through 2026, bringing rates down in the UK from current 3.75% to around the 3% level. That looks very unlikely now, and the value of shares and bonds have adjusted to different interest rate expectations – staying where they are for much of the year, but pricing in scenarios of rates maybe falling a little, but also with the risk of having to rise a little should the conflict worsen.
How should investors react to such events?
Sudden falls in stock markets can be unsettling, and makes us question what we should be doing, if anything.
As always, the best advice for investing is to focus on your personal financial goals and avoid reacting to daily market news. Global stock markets process new information extremely quickly. Anything you see in the news or read online has likely already been included in asset prices.
It looks like the conflict will drag on for longer than the military strikes of last year, but as above, things can change quickly. It is new, unexpected information that moves markets, and since no one can predict the future, the best plan for individual investors is to stay focused on their long-term financial goals and reasons for investing.
We hope the information in this article is useful, but it isn’t financial, personal or tax advice. If you’d like advice, Octopus Money can provide professional help. Remember, the value of investments can go up and down, so you may get back less money than you put in.
You should think of investing as a medium to long-term commitment – so be prepared to invest your money for at least five years. Tax depends on your individual circumstances and the regulations may change in the future.
