The latest news from the Middle East points to a ceasefire and the possible resumption of energy and goods flows through the Strait of Hormuz. But perennial themes such as diversification, defense, and discipline remain core to our investment conversations. Below, our investment experts discuss the implications of geopolitical risk and high energy prices on their asset classes, and how they’re managing portfolios in this environment.
The macro view
Escalating geopolitical tensions have disrupted global oil supply, raising energy prices and increasing uncertainty at a time when inflation pressures remain a key constraint for policymakers. History suggests that the economic impact of such shocks depends critically on their duration, with even temporary disruptions acting as a tax on global demand and more prolonged disruptions leaving lasting scars through weaker confidence, delayed investment, and tighter financial conditions.
Leading economic indicators continue to point to underlying resilience, but market-based measures of growth expectations and risk appetite have cooled, consistent with a transition from expansion toward a slowdown phase rather than an abrupt downturn. Inflation momentum has reaccelerated, driven primarily by energy, complicating the policy outlook, especially for energy-importing economies.
Against this backdrop, we have moved to a neutral overall risk stance. Within equities, we maintain a moderate overweight relative to fixed income but emphasize defensive characteristics such as quality, earnings visibility, and lower volatility. In fixed income, we favor increased duration as a risk management tool, expressed through inflation-linked securities, while maintaining a cautious stance toward overall credit risk. This balanced positioning reflects a more uncertain phase of the cycle with a narrower margin for error.
While our preferred cyclical indicators are trending in the wrong direction, they are not pointing to disaster. Taken together, a gradual but not meaningful deterioration in cycle indicators suggests that markets still appear to believe in an exit ramp and an eventual resumption of the expansion once near-term uncertainty fades. — Brian Levitt, Chief Global Market Strategist and Head of Strategy & Insights
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Emerging market stocks
The situation in Iran and the broader Middle East has implications for Asia and emerging market economies. The Strait of Hormuz is a critical artery for oil and gas transport to Asia and an important driver of energy prices. While higher energy prices are supportive for net energy exporters across emerging markets, the environment is challenging for energy‑importing Asian economies and has implications for inflation and the economic backdrop.
The oil market moving from an oversupply to tight supply, shaped by chokepoints, serves as a reminder of how quickly narratives can change. The lesson for us remains diversification and flexibility — maintaining exposure across geographies, styles and themes. But also remaining disciplined by leaning into new underappreciated opportunities as conditions evolve.
At present, our Asia and emerging markets portfolios have exposure to energy and net energy exporters and a significant underweight to net energy importers (India, Taiwan, Korea) where we believe valuations reflect too much optimism. However, as energy stocks outperformed tech by almost 20% in March1, the picture is now more nuanced — stock selection remains key. — Ian Hargreaves and William Lam, Co-Heads of Asia and Emerging Market Equities
Strategies to explore:
Invesco Developing Markets Fund
Invesco Asia Pacific Equity Fund
Invesco Emerging Markets ex-China Fund
Private real estate
The effects of the Iran war on private real estate are less about direct physical disruption and more about how geopolitical conflict transmits through the broader economy. The most important channels are inflation expectations, interest rates, and investor risk appetite, all of which influence financing costs, valuation assumptions, and confidence among investors and property tenants. Depending on the duration of the conflict, real estate markets may experience delayed leasing decisions or slower transaction activity, even if longer‑term fundamentals remain intact.
From an operating perspective, the conflict’s effects are likely to be uneven across property sectors and markets. Changes in economic growth, trade patterns, and corporate cost structures can influence occupier demand, but these impacts tend to be more pronounced in certain property types and geographies than others. On the supply side, higher energy costs and disruptions to energy‑linked materials may raise construction costs or delay development timelines, potentially restraining new supply. For existing assets, reduced levels of new construction can help support occupancy and rent growth where demand remains resilient.
For investors, the current conflict reinforces the importance of disciplined underwriting, prudent leverage, and a focus on assets with durable cash flows. The longer uncertainty around the conflict persists, the greater the risk that leasing and investment decisions are delayed. At the same time, periods of slower capital deployment may create openings for investors willing to look beyond near‑term volatility in what remains a long‑term asset class. — Mike Sobolik, Investment Strategist, Direct Real Estate, North America; Mike Bessell, Managing Director, European Investment Strategist
Strategies to explore
US midstream energy
Midstream companies may offer defensive characteristics in volatile markets, with fee-based, contractually supported revenues that tend to be less sensitive to swings in oil and gas prices. These companies operate an array of assets that enable oil and gas production to be gathered from producing basins, processed, and delivered to consumers. For each of these services, midstream operators typically charge a fee, or use a fee-like mechanism, for the volume accommodated. Therefore, current high oil and gas prices have little impact on these fee-for-volume arrangements — although the industry could see some near-term benefits. For example, operators with export capacity may benefit from the spike in global price differences.
At some point, this conflict will end, global energy markets will likely revert to normal, and the current spike in energy prices will likely fade. With fee-based, contractually supported revenues, we believe a return to more normal prices should not materially impact the midstream sector’s fundamentals on the way down either.
Over the longer term, the Middle East crisis has impacted the ability of significant volumes to exit the region. As a result, commercial and strategic inventories in various locations across the globe will likely be drawn down. Notably, on March 11, 2026, the International Energy Agency announced its 32 member countries will release 400 million barrels of strategic reserves. Post crisis, these members will likely seek to refill these reserves, creating additional demand for a longer period of time. In our view, US midstream companies and master limited partnerships (MLPs) stand to potentially benefit from higher volumes and asset utilization, positioning them at the center of global energy rebalancing. — Brian Watson, Senior Portfolio Manager
Strategies to explore
Invesco SteelPath MLP & Energy Infrastructure ETF
Invesco SteelPath MLP Income Fund
Fixed income
In an energy shock, some sectors may benefit, such as certain energy-linked credits, while others can face cost pressures, such as transportation names and industrial issuers facing higher input costs. The goal in a multi-sector or core-plus strategy isn’t to make one big macro bet — it’s to build diversified return drivers designed to hold up amid various challenges.
Toward the end of 2025 and continuing into this year, we’ve been deliberately risk-off across our multi-sector portfolios. That shift reflects our view that, when uncertainty rises, preserving flexibility and resilience becomes more important than stretching for incremental yield.
That said, periods of volatility may create opportunity at the margin. We’ve recently seen new issue activity in high-quality investment-grade corporates come at more attractive concessions, and the recent bout of market volatility has begun to open up selective pockets of value. We’re engaging in those opportunities cautiously and selectively, rather than broadly re-risking portfolios.
Our bias remains toward quality and balance. That means emphasizing higher-quality corporates, being very selective in high yield — focused on shorter-duration, higher-quality names — and using securitized sectors to help diversify income streams. The flexibility embedded in our core-plus approach allows us to adjust exposures as conditions evolve, without locking portfolios into any single macro outcome. Our goal is to continue delivering durable income while maintaining portfolios that can hold up across a wide range of growth, inflation, and policy scenarios. — Todd Schomberg, Head of Investment Grade Portfolio Management, and Matt Brill, Head of North America Investment Grade
Strategies to explore
Global stocks
Let’s begin with the caveat that forecasting the trajectory of geopolitical events is inherently difficult and predicting markets’ short‑term reactions is often even more so. Policy direction and objectives have evolved since the start of hostilities, offering limited visibility into timing or end‑states. At the same time, the Iranian regime faces material pressure that could harden its resolve, even as it contends with a level of sustained military engagement it has not previously experienced. Against this backdrop, elevated market volatility is unsurprising.
Oil is the key variable through which this conflict transmits to global growth and equity markets, as the Middle East itself is not a material contributor to global equity indices or gross domestic product. Europe is more exposed than the US to sustained higher energy prices due to greater industrial energy intensity and heavier reliance on imported hydrocarbons, a dynamic that also applies to Japan and much of Asia. A prolonged disruption to shipping through the Strait of Hormuz would be challenging for all markets, more so non-US equities.
Our experience has been that geopolitical events of this nature, while capable of driving meaningful short‑term volatility, rarely alter the long‑term trajectory of equity markets. As a result, our investment approach generally emphasizes discipline over reaction, avoiding major positioning changes in response to headline risk. We remain focused on long‑term structural growth themes and underlying company fundamentals, which we believe ultimately drive returns through periods of uncertainty. — John Delano and Robert Dunphy, Senior Portfolio Managers
Strategies to explore
Invesco International Growth Fund
International Growth Focus ETF
Defense industry
The conflict in Iran has stressed the need for both new technologies and adequate spending to maintain defensive systems. Protecting against threats to infrastructure across the Gulf has required a significant use of more expensive air defense systems.
This comes amidst a larger shift toward artificial intelligence, space, and cyber technologies that are pushing the old boundaries of what the defense industry historically contained. From high energy laser beams designed to knock out drones to hypersonic missiles, the future of defense could quickly grow beyond traditional tanks and jets. — Rene Reyna, Head of Thematic and Specialty Product Strategy ETFs and Indexed Strategies
Strategies to explore
