In this piece, the Charity Team at Sarasin & Partners, explain how recent events in the Middle East could impact charity investors.
The recently announced ceasefire should be understood as a pause in escalation rather than a durable resolution. While it reduces the immediate risk of further military action, it does not address the underlying strategic tensions driving the conflict. Our central case remains a “muddle-through” scenario, where volatility may ease in the near term but a persistent geopolitical risk premium continues to shape markets.
For charity investors, this distinction is important. The ceasefire has modestly improved the near-term backdrop, particularly by reducing the probability of further acute disruption to energy supply. However, the structural implications remain largely unchanged. Iran retains influence over the Strait of Hormuz, and the risk of renewed disruption to energy and shipping routes persists. As a result, we expect a continued risk premium in oil and broader commodity markets, alongside periodic volatility in financial assets.
In terms of investment performance, the conflict has primarily transmitted through energy markets. Oil prices have risen sharply this year, reflecting a significant supply shock, before partially retracing following the ceasefire. This has fed into inflation expectations and market sentiment. That said, diversified portfolios have generally proved resilient. Global growth was relatively robust entering the crisis, fiscal policy remains supportive, and ongoing investment in AI continues to underpin earnings. Equity markets have been volatile but not dislocated, and we have used the recent weakness to modestly add to equity exposure.
From an asset allocation perspective, the ceasefire has slightly reduced the risk of more aggressive monetary tightening, allowing central banks greater scope to look through the energy-driven inflation spike. This supports a more balanced stance on government bonds. At the same time, we remain cautious on corporate credit, where spreads do not adequately compensate for emerging risks, particularly in private credit markets. Traditional safe havens have behaved less predictably, with only modest US dollar strength and some weakness in gold, reinforcing the importance of broad diversification.
For charities, the practical implications extend beyond market movements. We highlight three areas for client consideration:
- Financial resilience: Higher and more volatile energy prices can feed through to operating costs, particularly for charities with exposure to transport, logistics or imported goods. Budgeting and liquidity planning remain key.
- Operational risk: For charities working in, or funding activities in, the region, the focus should remain on sanctions compliance, counterparty due diligence and oversight of fund flows. The ceasefire does not materially reduce these requirements.
- Governance and communication: Trustees should be comfortable that portfolios remain aligned with long-term objectives and risk tolerance, and are prepared to address stakeholder questions, including around responsible investment and exposure to sensitive sectors.
In line with our broader investment approach, we continue to advise against reacting tactically to short-term developments. The more durable signals lie in the structural forces beneath the conflict. In our view, these include a more fragmented geopolitical environment, sustained pressure on energy and defence supply chains, and a gradual shift in the global monetary order. These trends are likely to persist irrespective of short-term ceasefire dynamics.
In summary, while the ceasefire is a welcome de-escalation and may reduce near-term volatility, it does not materially alter the core considerations for charities. The environment remains characterised by geopolitical uncertainty, elevated energy risk and the need for disciplined governance and long-term investment thinking.
For informational purposes only and should not be relied upon. It does not constitute a solicitation or offer to buy or sell any security, nor investment advice or a recommendation. Sarasin & Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN: 475111).
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