In a world shaped by persistent geopolitical fragmentation and market volatility, Jeremy Harding, head of wealth management at Norman K. London looks at how investors should reposition their portfolios.
By mid-April 2026, the financial markets appear to have crossed a major psychological threshold: following six weeks of open conflict between the United States and Iran and the announcement on 8 April of a two-week ceasefire – which could, incidentally, be extended – investors have partially ‘re-priced’ geopolitical risk without, however, neutralising it. The reactions observed in the equity and fixed-income markets reflect less a return to normal than a shift from a state of panic to one of structural volatility, in which energy risk remains dominant.
The historic spreads between ‘dated’ Brent and futures contracts attest to the fact that the global energy supply chain remains disrupted. The Strait of Hormuz remains only partially reopened and part of the Gulf’s export capacity has been permanently damaged. The ceasefire appears to be more of a tactical mechanism for temporary de-escalation than a credible basis for lasting normalisation. Put another way, the geopolitical shock has now been factored in, but not resolved.
In this month’s World Economic Outlook, the IMF refers to a ‘global economy threatened by war’, with global growth slowing to 3.1% in 2026, down from 3.3% previously, and inflation expected to rise to 4.4%. The assessment is even harsher among some analysts, who believe that markets continue to underestimate the inflationary nature of the ongoing energy shock.
In the United States, the sharp rise in energy prices has already begun to feed through to core inflation: the Core PCE is hovering around 3%, well above the Fed’s target, whilst the March CPI rose to 3.3% year-on-year.
Contrary to what was anticipated at the start of the year, the prospect of rate cuts has receded. For now, the Fed is maintaining a neutral stance, but the likelihood of a prolonged status quo has increased as rising energy prices have fuelled inflation. In Europe, the ECB faces a similar dilemma: weak growth and inflation that is too high to justify rapid easing. Headline inflation is rising towards 2.5%, driven by energy and certain intermediate goods against a backdrop of already sluggish growth, which heightens the risk of quasi-stagflation.
In this environment, portfolio construction can no longer be based on the assumption of a rapid return to a regime of low inflation and abundant liquidity. Increased exposure to energy- or commodity-exporting economies provides partial protection against an escalation or incomplete normalisation. Critical industrial metals and certain agricultural inputs are also benefiting from persistent logistical constraints. Similarly, companies able to pass on cost increases appear better positioned than long-duration growth stocks.
In any case, if it wasn’t already clear, the last seven weeks confirm that the markets have entered a phase of multiple structural risks: geopolitical, inflationary and institutional. The ceasefire in the Middle East is temporarily calming the markets, but it does not resolve either the energy imbalances or the strategic rifts that are reshaping the global economy. For the professional investor, the challenge is no longer to anticipate a rapid ‘exit from the crisis’, but to build robust portfolios capable of withstanding uncertainty over the long term.
Main image: matteo-curcio-ENSff4X7fTA-unsplash
