How Investors Should Think About the Ceasefire

US President Donald Trump announced a ceasefire in the Iran war overnight Tuesday, and markets reacted Wednesday as most analysts and economists we follow projected: Stocks jumped and Brent crude oil and European natural gas prices plunged on news Iran would reopen the Strait of Hormuz as part of the deal.^[i] We see some key takeaways for investors here, and they may be a surprise.

First, crucially: Markets didn’t wait for an all-clear (and this news isn’t assured to be one, which we will get to). Yes, Wednesday’s moves in stocks, oil and European natural gas were huge. But all started improving before the ceasefire announcement, as Exhibits 1 and 2 show.

Exhibit 1: Stocks Moved Before the Ceasefire

Source: FactSet, as of 8/4/2026. MSCI World Index return with net dividends in GBP, 27/2/2026 – 8/4/2026. Indexed to 100 at 27/2/2026. See annex for longer return history.

Exhibit 2: So Did Oil and Natural Gas

Source: FactSet, as of 8/4/2026. Brent crude oil price in dollars and Dutch TTF natural gas price in euros, 27/2/2026 – 8/4/2026. Indexed to 100 at 27/2/2026.

Second: In our view, markets don’t demand perfection and don’t hinge on minute-by-minute happenings. We think this, because despite all the chatter around a ceasefire Tuesday night, it isn’t clear much has changed.^[ii] To us, all indications Wednesday were that the Strait remains closed, with Iran regulating traffic to toll-paying tankers it deems friendly.^[iii] Western-flagged ships didn’t transit en masse.^[iv] Insurers and maritime risk management professionals haven’t given the green light, and the Strait reportedly remains mined.^[v] Yet news of all this hasn’t caused crude oil’s slide to reverse sharply.^[vi] Nor did Iran’s announcement that the Strait is closed again after Israeli attacks on its Lebanese proxy, Hezbollah.^[vii] Nor did reports of drone strikes on Saudi Arabia’s East-West pipeline, which producers are using to reroute oil from the Strait to the port of Yanbu.^[viii] Instead, oil ticked up just a bit from intraday lows, whilst America’s S&P 500 index barely blinked.^[ix] It seems to us markets are looking forward, not at the ever-changing headlines.

We think all of this speaks to the importance of investors lengthening their focus. In our view, fixating on headlines’ short-termism can create a false sense of urgency. It can lead to setting deadlines for things to improve. Or identifying catalysts and benchmarks the news has to hit to justify stock ownership. In our experience, it can inspire a powerful urge to just do something portfolio wise to seize control from world events, even though investors have no influence over them. We have seen some bog themselves down trying to pick—and chase after—war winners whilst avoiding losers. In our view, this is a recipe for chasing your tail and getting whipsawed—buying or selling right before the market moves in the opposite direction.

In the short term, the news can hit hard. We think his is partly because fast-changing sentiment can make people react rashly, driven by fear and greed, and partly because there is a whole class of professional traders whose job it is to capture quick price movements or manage futures contracts for businesses heavily exposed to exchange rates or commodity prices.^[x] Based on our research, all of this feeds into markets’ short-term (over)reactions. But we have found these moves are usually fleeting as markets do what our research finds is their primary job: looking 3 – 30 months ahead and weighing investors’ consensus view of how reality will unfold relative to expectations over the longer term. Said another way, investors and traders/speculators are always battling over market control and pricing. Traders and speculators can win out in the short term. But over time, the collective decisions of millions of investors in it for the long haul win out. This is why legendary investor Ben Graham preached that markets are a voting machine in the short term but a weighing machine in the long run.

To us, investing—managing a portfolio for a long-term set of goals—isn’t always about trading. We think it is about building, making tactical decisions when warranted and, a lot of time, holding—resisting the temptation to react. We find traders and speculators react. Computerised trading platforms, too. In our view, investors do best when they make deliberate, well-reasoned, probabilities-based decisions about what is likely to happen in the medium and longer term. Reacting to what just happened is the antithesis of that. Simply put, in our view active investing isn’t reactive. It is forward-looking, aiming to position to capture the larger, longer-term trends you can identify. Reacting is by nature backward-looking.

This isn’t a recommendation to ignore the news. That would be unrealistic, in our view, and it clearly isn’t something we practice. But we urge investors to work hard to mute the signals arising from the news—the fear and greed inspiring portfolio action. When the urge arises, we think investors benefit from remembering who they are: probably not a speculator or professional (or semipro) short-term trader. More likely, an investor aiming to achieve the long-term returns necessary to fund their goals. Placing this first in mind emphasises the reason behind owning stocks (and maybe some bonds). Then ask the critical questions: Has that reason changed? Not just for stocks, but for various sectors and regions? Absent a change to one’s goals or a change in stocks’ fundamental conditions and outlook, we find the right move will often be to sit tight.

To us, the Iran-related volatility shows this well. Thus far, it has been fleeting. Should 27 March prove to be the low, it will have ended much faster than most commentators we follow expected.^[xi] If there is more downside from here, we reckon it will illustrate the flaws of interpreting big, good news as an automatic all clear. Looking under the bonnet, we can also see these principles in Energy stocks, whose massive wartime outperformance started reversing as oil prices eased over the last week.^[xii] And in geographic returns: US stocks outperformed on the way down as negative speculation around energy disruptions hit the most exposed regions hardest. But non-US stocks have led again since late March.^[xiii]

Since the war broke out, we counselled staying cool and thinking long-term. We still do. The reason to be bullish now isn’t that the Strait is maybe open and missile and drone strikes will maybe stop. We think the reason to be bullish is that, with or without a ceasefire holding this week, the economic and political factors supporting corporate earnings over the next 3 – 30 months remain intact. Lending is healthy and looks set to remain so, in our view, but not enough to spike money supply to the degree necessary to reignite hot inflation.^[xiv] Corporate earnings are growing, and analysts expect them to strengthen this year.^[xv] Political gridlock keeps legislative risk low around the developed world, a factor US midterms look set to turbocharge late this year.

Look to these longer-term factors to drive returns, not day-by-day events in one tiny waterway.

Annex:

Source: FactSet, as of 8/4/2026. MSCI World Index return with net dividends in GBP, 8/4/2021 – 8/4/2026.