In this Milford Report segment of Herald NOW Business, Kate Tyro of Milford explains why the duration of the closure of the Strait of Hormuz, not necessarily the Iran war itself, is what markets are focusing on. The closure is impacting the markets because it is causing a spike in energy prices, which in turn leads to higher inflation and changing expectations over interest rates. These factors, over time, become effectively a tax on growth as input costs for business rise. Kate also explains why reacting in the short-term to market volatility is the biggest mistake investors make. War headlines and market falls do invoke fear, but in reality, markets drop 10% or more every one to two years anyway – and always recover – so market reactions like that are not unusual.
