Positioning amid geopolitical tensions in the Middle East – Counterpoint March 2026
8 mins to read this article
Daniele Antonucci
Daniele Antonucci is a managing director, co-head of investment and chief investment officer at Quintet Private Bank. Based in Luxembourg, he jointly chairs the investment committee, owning decision-making and performance outcomes. As head of research, Daniele oversees the investment strategy feeding into portfolios and the teams of specialists across asset classes and solutions, ranging from macro, fixed income and equities to funds, alternatives, and structured products and derivatives. He leads the network of chief strategists, communicating the house view on the economy and markets to financial advisors, clients and the media.
Prior to joining Quintet in 2020 as chief economist and macro strategist, Daniele served as chief euro area economist at Morgan Stanley in London. He completed the High Performance Leadership Programme at Saïd Business School, University of Oxford, holds a master’s degree in economics from Duke University and graduated from the Sapienza University of Rome. Featured in The Economist and Financial Times and often quoted in the generalist press, he’s a published author in finance and economics journals and investment magazines, a frequent speaker on CNBC and Bloomberg TV, and an ECB Shadow Council member.
What you need to know
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Events in Iran and the US strike have increased geopolitical uncertainty. We’re therefore buying gold, funded by selling US Treasuries. Treasuries have risen since our last purchase, but fiscal spending ahead of the US midterms could become a concern for markets, so we’re trimming our exposure.
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We’re also continuing to diversify our equity allocation. We’re reducing US equities and buying attractively valued small-capitalisation companies in developed markets. These firms focus more on their domestic economies, which gives them some insulation from global events. They also stand to benefit from fiscal stimulus.
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Political uncertainty is rising in the UK. So we’re selling gilts and introducing emerging market bonds in local currency. They offer compelling yields, should benefit from a weaker dollar and provide exposure to selected oil exporters. Given the rise in geopolitical uncertainty, we’re holding some extra cash to use if new opportunities arise.
Note: Any reference to portfolio positioning relates to our flagship core discretionary portfolios. Clients invested in other strategies, or in bespoke and advisory portfolios, should consult their Client Advisor.
What to make of Iran
The attack by the US and Israel on Iran this Saturday has been bubbling for some time, but the weekend’s timing came as somewhat of a surprise. Oil prices had been rising in recent weeks due to expectations that supplies could be disrupted by a military conflict. Heightened uncertainty is likely to lend further support to oil prices. It could also lift safe-haven assets such as gold. The length and scale of the conflict are key for investors’ next moves.
These geopolitical events haven’t come out of the blue. We started to prepare for them some time ago. In recent months, uncertainty around Venezuela, Greenland and Iran led us to increase the quality of our fixed income exposure. We took profits on corporate bonds with demanding valuations and bought safer government bonds.
Where permitted, we also extended our US equity warrant. This is an insurance-type instrument that rises in value when US equities fall, partly mitigating downside risks. We also hold gold, broad commodities and high-quality bonds, including those that may benefit if inflation rises.
Our investment team is very focused on what’s happening to the Strait of Hormuz and the implications for oil, including the decision of the oil producers’ cartel (OPEC+) to increase production to mitigate the price rise caused by the disruptions. Apart from energy, we’re watching maritime shipping, aviation, supply chains, defence and insurance, just to name a few, along with the impact on the global economy. The team continues to explore these questions:
- Can the US meet its geopolitical objectives quickly?
- Is Iranian retaliation likely to lead to a much broader conflict?
- Will stimulus cushion stagflation risks (slower growth, higher inflation)?
- Does this event make interest rate cuts more or less likely?
- Which asset classes, regions and sectors stand to benefit or lose?
Investing in the midst of geopolitical events
We’re moderately overweight equities and underweight bonds. While the US remains key for long-term growth and AI exposure, we tactically prefer emerging markets and Europe because valuations are more attractive. Emerging markets also benefit from a weaker dollar and offer diversification within the AI theme through China, Taiwan and South Korea. Europe gives us exposure to themes such as defence and infrastructure.
We’re now entering a new position in attractively valued small-capitalisation companies (small caps). 60% of this allocation is in US small caps. These firms rely more on domestic business and are therefore less exposed to global events. They can also benefit from US policy support. The rest is in European and UK small caps (25%) and Japan (15%), which adds geographical diversification. We’re funding this allocation by reducing our position in US equities.
We think the events in the Middle East are likely to support gold. We’re therefore increasing our exposure back to overweight and financing this by selling US Treasuries. Geopolitical uncertainty has slightly supported our US Treasury position. However, concerns around US debt have increased due to potential spending ahead of the midterms, so we’re reducing exposure.
Importantly, we continue to diversify our fixed income allocation by introducing emerging market bonds in local currency, which we plan to add in the very near term depending on market conditions. We believe these bonds will benefit from dollar weakness and the emerging market central bank rate cuts we expect this year. They also offer attractive yields, diversification and solid fundamentals, including a higher share of oil exporters relative to developed market sovereign bonds. We’re funding this purchase by selling UK gilts, given rising domestic political uncertainty, while retaining some cash to redeploy if other opportunities arise.
Stay calm and carry on
We advise clients not to react to headlines. Staying invested and diversified across regions helps returns compound over time. 80 years of data suggest that although markets may lag over three months, equity returns six and twelve months after a geopolitical shock are similar to those in other periods.
Our US equity position is important given the dominance of the US in global markets, but well diversified. Alongside standard shares, we hold equal-weighted US equities. This increases exposure to financials and industrials that may benefit from deregulation and stimulus. It also reduces reliance on technology, where valuations are high. We also limit currency effects to reduce the impact of a weaker dollar when converting into euros.
For us, diversification is more effective than reaction. A wobble in parts of the portfolio, such as equities affected by Middle Eastern tensions, may be offset by gains elsewhere, such as commodities. We’re comfortable with our overall strategy but continue to look for ways to position for opportunities while mitigating downside risks.
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