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Video: UBS Chief Economist: Oil price surge, inflation reality, and resilient US consumers (8 mins)
Video: CIO’s Min Lan Tan on what AI and geopolitical shocks means for APAC and EM equities (7 mins)
Podcast:Across the Pond: Trump, Iran, and the global ripples on or (23 mins)

The US-Iran conflict continues to dominate headlines, with the effective closure of a vital energy chokepoint, heightened volatility in commodity prices, and shifting political messaging making it challenging to discern the ultimate impact on growth and inflation.

Global equities rose and Brent crude oil prices fell below USD 90 a barrel after the International Energy Agency (IEA) reportedly proposed a coordinated release of a record amount of joint global oil reserves, with a decision expected before the end of the day. However, the UAE has shut its biggest oil refinery after a drone attack, and Iran is reportedly taking steps to deploy naval mines in the Strait of Hormuz. Meanwhile, the US and Israel continue their airstrikes against Iran, whose Revolutionary Guards said it fired missiles at US bases in neighboring states.

It is natural for investors to feel unsettled or to consider retreating to the sidelines until the outlook becomes clearer. But periods of uncertainty and market stress are not new, and historical data demonstrate that investors with a longer-term horizon are best served by staying invested with a diversified portfolio.

Volatility is not a good reason to exit the market. Intra-year declines are common—the S&P 500’s average maximum drawdown has been about 14% since 1981. But the index has only finished in negative territory 10 times in the past 45 years. Importantly, stocks tended to perform well after bouts of heightened volatility. Since 1990, the S&P 500 has delivered an average 12-month return of 11.5% following episodes when the VIX index rose to between 27.5 and 30, and an even higher return of 22.1% after the VIX reached 35-40. Both figures compare favorably to the forward 12-month average return of 10% in all other periods.

Market timing can be costly. A USD 100 investment in the S&P 500 in September 1989 would have grown to USD 3,617 by the end of January 2026 with a simple buy-and-hold approach. However, missing just the best week would have reduced the return to USD 3,249, while missing the best quarter would have resulted in only USD 2,863—over 20% less than the return for investors who remained invested throughout.

Staying invested is likely rewarded with attractive performance. Stock markets have historically experienced more positive years than negative ones. Since 1960, the S&P 500 has posted gains in 72% of calendar years, with returns between 10% and 30% nearly half the time. In addition, the index has delivered returns above 20% in 18 years, but has lost more than 20% in only three years. This means that the odds are more favorable for investors with longer time horizons—the S&P 500 has not recorded a negative return over any 20-year period since 1926. Meanwhile, statistical analysis of asset class performance reveals that no single asset consistently outperforms across all market cycles, and that a 60:40 equity-bond portfolio has historically been able to reduce risk during market downturns.

Investors should remember that past performance is no guarantee of future results. But for investors who hold a diversified portfolio and have the ability to stay invested for the longer term, we continue to believe that they will be rewarded for staying the course. For those with concentrated equity positions, we recommend broadening exposure across sectors and geographies. We also believe adequate allocations to quality fixed income, gold, and alternatives such as hedge funds would help investors better navigate the market ahead.