Conflict-ceasefire cycle risks global stability

John Wyn-Evans, head of market analysis at Rathbones, highlights a more cautious mood in markets as investors approach the ceasefire deadline with inflation, interest rates and energy prices still in sharp focus.

John Wyn-Evans, Head of Market Analysis at Rathbones, said: 

“Markets are entering the ceasefire deadline with a more cautious tone. Policymakers are very clear that inflation risks remain skewed to the upside, particularly where energy prices are concerned, and that limits how quickly interest rates can come down.

“For anything more durable to emerge, both sides need at least enough progress to declare a form of victory and save some sort of face. For Iran, that means tangible movement on sanctions relief and a recognition of civilian nuclear rights; for the US, credible oversight of nuclear materials and a containment of regional escalation. Crucially for markets, we also need to see progress towards reopening the Strait of Hormuz, because that is the channel through which this conflict most directly feeds into oil, inflation and financial conditions.

“Against that backdrop, this on‑again, off‑again cycle of conflict and ceasefire simply can’t continue. Each flare‑up feeds straight through oil prices, inflation expectations and bond yields, making it harder for central banks to provide the certainty markets want. Relief rallies only get you so far when the underlying risks keep returning.

“As long as negotiations remain live and there is visible progress, markets are likely to stay broadly calm. But for investors, the message is consistent: don’t chase short‑term optimism around deadlines. With rates likely to stay higher for longer and geopolitical risk still present, diversification and discipline matter far more than trying to time the next headline.

“It also reinforces why policymakers are becoming more cautious. Central banks can’t simply look through repeated shocks if they keep reemerging, because credibility on inflation matters. The longer this cycle drags on, the more it risks entrenching higher inflation and tighter financial conditions than anyone wants, which is why a durable outcome matters far more than another short‑term pause.”