Mar 12, 2026 RDL Financial Planning

What to do when markets turn volatile

The conflict in the Middle East has caused a sharp rise in market volatility. Investors are unsure how long the situation will last, and this uncertainty has pushed oil prices higher, lifted government bond yields, and led to falls in global share markets. Many of the market trends that were previously in favour have reversed.

• Oil prices have jumped more than 20%, affecting inflation expectations and interest rates.
• Bond yields in the US and Australia have risen by more than 0.10%.
• Credit spreads have widened slightly.
• Equity markets have fallen, particularly emerging markets.
• Gold has dropped around 2% as investors sell assets to meet margin calls.
• The US dollar has strengthened.

These moves reflect a shift away from previous consensus trades and a more cautious market tone.

 How to think about the outlook

Markets appear to be pricing in a short‑lived conflict, but the situation remains uncertain. Three broad scenarios are worth monitoring:

1. Contained escalation — Limited, symbolic strikes with volatility easing over time.
2. Regional conflict — Wider involvement of Gulf states, keeping oil close to USD 100/bbl.
3. Strait of Hormuz disruption — Major shipping interruption, causing a severe global inflation and growth shock.

At this stage, all three scenarios appear equally possible.

Why the economic backdrop matters

 Higher oil prices add pressure to inflation, which is already above central bank targets in both the US and Australia. If energy prices stay elevated, core inflation could rise again. This is why bond markets are now pricing:

• Fewer rate cuts in the US, and
• A higher chance of rate hikes in Australia.

Higher oil prices also slow economic growth. The US economy has been resilient, but prolonged high rates could weigh on activity.

How investors can manage volatility

 With the duration and scale of the conflict unknown, volatility may remain elevated. In these environments:

• Avoid knee‑jerk reactions — sudden moves often lead to poor outcomes.
• Don’t try to time the market — short‑term swings are unpredictable.
• Ensure diversification — spreading risk across asset classes helps cushion shocks.
• Rebalance portfolios deliberately — adjusting back to target weights can help manage risk.

We will continue to monitor developments closely and assess them against the scenarios outlined above.