Market Update | Middle East War

On 28 February 2026, Israel and the United States launched a coordinated military operation against Iran, codenamed Operation Epic Fury. The strikes targeted Iran’s leadership, nuclear programme, missile sites, military facilities and regime infrastructure. On 1 March, Iranian state media confirmed that Supreme Leader Ayatollah Ali Khamenei had been killed in the strikes, along with his daughter, son-in-law, grandson, and senior IRGC commanders.

Since the initial attacks, Iran has responded aggressively, launching ballistic missiles and drones at US assets and allies across the region. Targets included Israel, Saudi Arabia (Riyadh and Eastern Province), the UAE (Abu Dhabi and Dubai), Bahrain (US Fifth Fleet HQ), Kuwait (Ali al-Salem air base), Qatar (Al Udeid air base), Jordan and Oman.

The major implication of this conflict is on global energy markets. Iran only produces around 4% of the global oil supply, but the threat of Iranian military strikes on shipping has closed the Strait of Hormuz, through which around 20% of global oil and gas production is transported. In line with this, oil prices have spiked, rising around 40% in the last week, along with even larger increases in natural gas, diesel and jet fuel prices. If the conflict is protracted, some travel and war risk premium will be embedded into all energy until it is resolved and this will have a meaningful impact on markets and the global economy.

Markets do tend to sell first and ask questions later on geopolitical events such as this, as evidenced by trading on global equity markets over the last couple of days. However, they also recover quickly once conflicts are resolved or more importantly for this conflict, when we see the reopening of the Strait of Hormuz.

Portfolio Positioning

If we believe that action needs to be taken on the portfolio we will implement whatever change we consider necessary and advise you accordingly. Otherwise, it is important to remember that periods of sharemarket volatility can tempt some investors to panic sell, but reacting emotionally often locks in losses and risks missing the eventual rebound. Markets have always moved in cycles, and history shows that some of the strongest recovery days occur very close to the worst downturns—meaning that trying to time the perfect exit and re‑entry is almost impossible. By staying invested and focusing on long‑term goals rather than short‑term noise, investors give themselves the best chance to benefit from the market’s natural tendency to grow over time.

Disclaimer

Prepared by Drummond Capital Partners (Drummond) ABN 15 622 660 182, a Corporate Authorised Representative of BK Consulting (Aust) Pty Ltd (AFSL 334906). It is exclusively for use for Drummond clients and should not be relied on for any other person. Any advice or information contained in this report is limited to General Advice for Wholesale clients only.

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This report is based on information obtained from sources believed to be reliable, we do not make any representation or warranty that it is accurate, complete or up to date. Any opinions contained herein are reasonably held at the time of completion and are subject to change without notice.