We consider the outlook for energy, diversifers such as gold, inflation and valuations.
9th March 2026
by Dave Baxter from interactive investor
Escalating conflict in the Middle East comes with a huge humanitarian cost but it also, unavoidably, raises big questions for markets.
And while we might feel reluctant to trade too much in response to such an event, it’s at least worth understanding how it can affect your portfolio, now and in future.
US and Israeli forces first launched air strikes in Iran on 28 February and we’ve seen some massive gyrations in markets since then. The potential knock-on effects for portfolios deserve consideration.
Back to the energy mix
The most eye-catching move so far has been for the oil price, which has soared amid concerns of disruption to supply. The price of Brent Crude oil surged as high as $119 a barrel in early trading today, marking its highest level since 2022. Ahead of the air strikes, it was trading at just below $70 a barrel.
This has a few effects. It is, of course, good for conventional energy funds. Performance data from 28 February to 6 March 2026 shows the
iShares Oil & Gas Explr&Prod ETF USD Acc GBP SPOG
having returned around 5%, with
Guinness Global Energy Y GBP Acc on 3.7%.
It also offers a sliver of hope for beaten-up renewable energy funds, such as ii investor favourite Greencoat UK Wind UKW
A higher energy price, and a fresh focus on investing in renewables to secure energy independence for the likes of UK, could drive better sentiment (and returns) for the sector.
Inflation and rates
But if it lasts, a higher oil price becomes a problem if it feeds into higher inflation.
I should note that some specialists have so far dismissed this as a major worry. But if things worsen we could find that further interest rates cuts are off the table for now – something that hurts the prospects for bonds, but also potentially for equity funds with a growth investment style.
Managers on funds such as Scottish Mortgage Ord SMT
will hope the companies in their portfolio have truly adapted to a world of higher rates as they claim they did in 2022.
If inflation and rates stay higher, bond yields also stay higher. This has a knock-on effect for “alternative” assets whose value is pretty closely correlated to government bonds.
A higher energy price could bolster renewables but higher gilt yields are still unhelpful for infrastructure fund
from Renewables Infrastructure Grp TRIG
to HICL Infrastructure PLC Ord HICL
as they are for property investment trusts.
But as with growth companies, we may find that such portfolios are more robust in the wake of 2022: property investment trusts, for one, have undergone significant consolidation in recent years.
Watch your diversifiers
I note that fresh inflation talk does not bode well for the likes of government bonds, which explains why they have tended to sell off.
The average fund in the Investment Association’s (IA) UK Gilts sector has lost around 2% over a week or so, while the yield on the 10-year UK government bond has risen from around 4.3% to almost 4.8%. Yields move inversely to prices.
Those who piled into gold and silver in the last few months have also had a rough week. Prices for both tumbled between 28 February and 6 March, while funds such as BlackRock World Mining Trust Ord BRWM
and Jupiter Gold & Silver I GBP Acc (BYVJRH9) suffered double-digit losses.
The sight of bonds and gold selling off alongside stock markets is not exactly welcome, but at least there are explanations.
The US dollar has strengthened, something that doesn’t bode well for gold, while any prospect of higher interest rates would make the opportunity cost of holding the metal greater.
But it’s worth remembering that the drop also likely relates to the fact that some investors need liquidity (or have to meet margin calls after other assets fell in value) – prompting them to take profits on it as a recent winner. Geopolitical uncertainty should also keep driving demand for safe-haven assets like this.
On a similar note, this is a good time to look at how traditional defensive funds, from Ruffer Investment Company RICA
have fared, and how they are positioned.
A reset for valuations
Last year was a bit of an everything rally, with equities and gold enjoying huge gains. But those gains do leave plenty of room for a fall, meaning some of your favourite markets, funds and shares have seen a big pullback.
We already have a few examples. South Korea’s Kospi index, which delivered phenomenal gains in 2025 and has a notable presence in all manner of global funds (from AVI Global Trust Ord AGT
to Artemis Global Income I Inc), plummeted over the course of a week, although the narrative of corporate reform driving returns there is presumably unchanged.
Shares in Europe, the emerging markets and Japan had a bad week or so, as did the FTSE 100, while some popular funds like Seraphim Space Investment Trust Ord SSIT
suffered surprisingly heavily since the onset of the conflict. Meanwhile, banking shares, a big driver of returns for many funds last year, were showing weakness this morning amid concerns of a knock for economic growth.
We recently noted that investors should avoid knee-jerk reactions when things seem uncertain. That can certainly apply here –although market shifts might also present a small buying opportunity on some of your favourite funds.
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