Over the weekend, the United States launched targeted strikes on three of Iran’s nuclear facilities — Fordow, Natanz, and Isfahan. President Trump has since stated that these sites were “completely and fully obliterated.” It was a significant move, but from our standpoint as investors, the key question is: what does this mean for the markets?

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Let’s start with what matters most — the risk of escalation.

‍Israel has already done considerable damage to Iran’s military infrastructure, and many of Iran’s regional proxies — Hamas, Hezbollah, and Syria — are largely dismantled. The Houthis in Yemen remain active, but their capacity is more symbolic than strategic at this stage. Iran’s ability to widen this conflict meaningfully is constrained, at least for now. So far, their only official response has been to file a complaint with the UN.

Of course, a limited retaliation remains possible — perhaps through isolated missile or drone strikes targeting U.S. or Israeli assets — but it’s worth noting that Iran is likely aware it’s operating from a diminished position. A full-blown military escalation would risk further destabilizing an already fragile economy and draw even greater international opposition. While Israel may continue pressing its advantage, there’s also the cost factor: maintaining the Iron Dome and replenishing missile stockpiles is not cheap. The longer this drags on, the more strained those resources become.

What’s perhaps most notable is that the U.S. chose to limit its strike to nuclear infrastructure, avoiding broader military targets. That signals a desire to leave space for de-escalation — a potential diplomatic off-ramp, should Iran choose to take it. So far, however, there’s little indication they will. Still, we don’t see signs that Iran wants to escalate this beyond controlled posturing. It’s clear they’re cornered, and they know it.

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Energy markets are the wild card here.

The Strait of Hormuz — through which roughly 75% of Asia’s oil imports flow — is the critical pressure point. If Iran were to attempt a full blockade, it would trigger a severe global response. But doing so would cut off their own primary source of revenue: oil. It would also antagonize China, a key trade partner and major buyer of Iranian oil. Any disruption to the Strait would force China to source energy on the spot market, where prices have already spiked in response to tensions in the region. Meanwhile, the U.S. and Europe remain far less reliant on energy coming through the Gulf, limiting the broader macroeconomic impact — though Qatar’s liquified natural gas exports, which are critical for global supply, could be a casualty of further disruption.

On the geopolitical stage, Russia and China have largely remained on the sidelines. There have been the expected formal condemnations of the U.S. strike, but no substantive action. China’s reliance on Gulf energy complicates its response. Russia, still deeply entangled in Ukraine, likely welcomes higher oil prices as a tailwind for its own struggling economy.

From a market perspective, we think it’s critical to separate the short-term noise from longer-term implications. In the immediate term, there will be volatility — that’s the cost of uncertainty. But history has repeatedly shown that geopolitical shocks, even serious ones, tend to be fleeting in terms of their impact on well-diversified investment portfolios. If, in fact, Iran’s nuclear ambitions are now materially set back, and their regional influence continues to fade, that could create longer-term tailwinds for global growth and, more specifically, for economic and political stability in the Middle East.

There are still variables in play, including the future of Iran’s regime. If hardliners take control, things could shift again. If the current leadership holds but loses influence abroad, the geopolitical threat may continue to diminish. None of this is easy to predict — and we don’t pretend to. But one telling signal we’re watching is the Israeli equity market, which has remained relatively strong throughout this period. Markets often speak louder than headlines.

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For clients, the takeaway is simple:

These are the moments that test investor discipline. Selling into fear and trying to time geopolitical events has historically been a losing strategy. Any significant pullback in risk assets — should one occur — may be an opportunity to add exposure, not retreat from it.

As always, we’re monitoring events closely and will keep you informed if the outlook shifts. In the meantime, stay diversified, stay patient, and stay invested.

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