Markets have rebounded from an initial sell-off linked to war in the Middle East, as investors price in limited disruption to global energy supply. 

But that recovery may underplay a more persistent risk: higher oil prices feeding inflation, squeezing growth, and delaying interest rate cuts. 

In episode 73 of Bridge talks Business, Milford Wealth Management Adviser Kate Tyro explained why the real risk isn’t renewed market panic – it’s what happens if oil prices stay elevated.  

Why markets can’t ignore this conflict 

Markets have long looked through geopolitical shocks. However, this year’s escalation involving Iran is harder to dismiss as noise.  

“This conflict has more market relevance because it is impacting the supply of energy,” Tyro said, noting that around 20% of global oil supply passes through the Strait of Hormuz.  

“If supply is restricted, that pushes oil prices higher – and the longer it stays blocked, the greater the risk of sustained inflation. 

“Markets were lower over the course of March and that was the general sell-off from the fears of restricted oil. We’ve seen this bounce back come through, with markets focusing on the likelihood that disruption will ease and the Strait of Hormuz will re-open.” 

If inflation linked to oil prices proves persistent, it could force central banks to hold rates higher for longer, with knock-on effects for growth and earnings. 

For investors, discipline matters more than timing 

The rebound may prove premature if inflation pressures persist, and the path forward is unlikely to be smooth. 

That uncertainty is exactly what diversified portfolios are designed to absorb. 

“One of the biggest mistakes we see, is people reacting to those short-term headlines and moving to cash or something less risky,” Tyro said. 

“By doing that, you’re locking in those losses. You need to be invested through to the recovery… staying invested means you participate in that pick-up.” 

“If you have a well-constructed, diversified portfolio, it’s built to ride through these events. Volatility is part of investing – it’s the price we pay for healthier long-term returns.” 

Catch the full conversation between Ryan Bridge and Kate Tyro in Bridge talks Business episode 73.