Investment update – Middle East conflict

Markets continue to be volatile, overnight we saw US markets end the day up on the back of comments from President Trump that indicated the Iran war will end “very soon”.  This calmed investor nerves, with the hope that this would see global energy supplies resume through the Strait of Hormuz. Our expectation is that we will continue to see heightened volatility in markets as the events in the Middle East continue. But our message to members remains the same, short-term volatility in markets is normal and it is important not to react to headlines and noise.

As events continue to escalate in the Middle East we are seeing global markets, including here in Australia, fall sharply as investors become increasingly concerned around the ramifications of a prolonged conflict in the region. We understand that this can create uncertainty for our members, so we want to provide an update on what is happening and how your super is positioned to navigate this period.

Tensions in the Middle East escalated following a series of military actions involving Iran, the United States and Israel. Missile strikes, retaliatory actions, and rising geopolitical tensions have disrupted a region that is critical to the world’s energy supply.

A key flashpoint is the Strait of Hormuz, a narrow channel through which around one‑fifth of the world’s oil exports typically flow. Disruptions and shipping delays in this area have raised immediate concerns about the reliability of global energy supply.

Because energy is a foundational input to every sector of the global economy, from manufacturing to transport, technology, agriculture and logistics, any sustained disruption has immediate effects on inflation, costs of production, and consumer spending, all of which directly feed into market sentiment.

As a result, oil prices have risen sharply, moving as high as nearly $120 a barrel before moving sharply lower overnight on the back of comments from President Trump that the war will be over “very soon”. Note that this is the first time that oil has gone above $100 a barrel since July 2022, when investors were reacting to the aftermath of Russia’s invasion of Ukraine.

Higher oil prices signal:
• Increased inflation pressures 
• Higher costs for businesses and consumers e.g. transport, manufacturing and energy prices
• Slower global growth 
• Uncertainty around interest rate decisions by central banks 

This combination of higher inflation risk and slower growth is why markets have reacted so severely. A period that is typified by higher inflation and slower growth is known as stagflation and the heightened risk of this occurring is why investor sentiment has turned sharply negative.

While this is a serious geopolitical event with real economic implications, it is important for members to understand that short-term volatility in markets is normal and is to be expected. This episode, like many before it, reinforces why diversification matters.

It is why we focus on designing an investment strategy that is centered around resilience and has the ability to navigate through whatever comes next, and deliver a consistent pattern of returns in both rising and falling markets.

Our strong long-term track record illustrates this, with our Balanced Growth Option delivering 8.18% p.a. over 15 years (to end December 2025), well above our long-term objective of CPI+3% p.a. It does demonstrate the benefit of remaining focused on long-term results rather than short- term noise. We will of course continue to monitor developments closely and adjust our portfolios were appropriate.

The behaviour we are seeing in markets right now is typical when investors try to price the economic impact of global events. Importantly, these movements reflect short‑term uncertainty, not long‑term structural change.

We do recognise that this can be an uncertain time for our members, but events such as this are exactly why we build portfolios that are diversified not only by asset class, but also within asset classes. Our member retirement savings are invested across different countries, asset classes, strategies and regions, aimed at ensuring the portfolio is resilient and built to deliver long-term real wealth for our members.

While the situation in the Middle East is serious and has resulted in significant volatility in global markets, it is important for our members to remember that at times like this it is critical to avoid reacting to the headlines and that it is time in markets, not timing markets, that delivers over the long-term.

We will continue to update members as the situation evolves.