Navigating a world in flux

As the US–Iran conflict pushes oil prices above $100 and the Strait of Hormuz remains effectively closed, near-term market shocks are compounding seven more serious structural threats to US global dominance, with significant implications for investor portfolios.

The confirmation of a leadership transition in Iran, with the new Supreme Leader, Mojtaba Khamenei, widely viewed as a hard-line figure unlikely to pursue early conciliation, adds materially to near-term risks. While President Trump’s established approach to the war has been to escalate quickly before de-escalating and declaring victory, Peter McLean, Head of Multi-Asset Portfolio Solutions at Stonehage Fleming, points out that it is a fluid situation, with the war’s trajectory and impact on energy markets poised to shape the investment landscape for the foreseeable future.

With President Trump pivoting towards a diplomatic resolution in recent days, McLean describes two likely outcomes for the war:

• Near-term ceasefire: A US declaration that key military objectives have been met, followed by a reduction in energy disruption, as the Iranian regime seeks an end to hostilities.
• Prolonged campaign: Continued Iranian ability and determination to maximise economic pain through energy disruption, resulting in further escalation in military activity as diplomatic efforts fail.

Looking back at the 2022 oil shock, McLean points out that it did not trigger a recession because a strong labour market and excess pandemic-era savings cushioned the blow. But the buffer built at that time has since weakened. “If oil prices remain above $100 for a sustained period, similar resilience should not be assumed, increasing the pressure on President Trump to signal that strategic objectives have been achieved sooner rather than later.”

On how investors should navigate this challenging period, McLean says: “Stay the course. History suggests markets often recover quickly following the initial shock of military conflict, particularly when supported by tailwinds such as rising fiscal spending and the continued expansion of artificial intelligence. We are monitoring closely for de-escalation signals and any stabilisation in energy flows through the Strait of Hormuz.”

Meanwhile, Graham Wainer, CEO of Stonehage Fleming Investment Management, notes that investors should also remember that the Iran conflict is unfolding against a backdrop of deeper structural vulnerabilities. “For a quarter-century, American exceptionalism has delivered extraordinary results, with US markets outperforming global competitors by roughly 3% annually, leaving the rest of the world around 50% behind. But seven emerging high-risk threats could sabotage that track record.”

The seven high-risk areas he believes are threatening US exceptionalism are:

• Labour market flexibility: Immigration restrictions and a rigid H-1B visa cap of 100 000 could constrain America’s ability to attract the AI talent required to sustain its technological edge.
• Reserve currency status: Recent policy actions risk eroding the trust underpinning dollar dominance, and while China lacks the institutional framework to challenge it in the near term, confidence can erode the greenback’s global dominance at the margins.
• Trusted borrower status: Talk of selective debt servicing or withheld payments to foreign creditors would raise America’s cost of capital at precisely the wrong moment.
• Pax Americana: Conditional security commitments are prompting allies to reassess long-held assumptions about US reliability, with potentially structural, not merely episodic, consequences.
• Technology and AI leadership: China holds around 60% of AI-related patents versus America’s 20%, produces double the STEM PhDs annually, and by 2050 projects 400 gigawatts of spare energy capacity for AI infrastructure.
• Energy deployment: Having energy is not the same as strategically deploying it. If AI infrastructure gets built elsewhere, America’s energy advantage becomes academic.
• Fiscal stability: The combination of spending ambitions, tax policy, and political reluctance to make difficult choices creates long-term vulnerability despite near-term consumer support.

Wainer’s bottom line is that American exceptionalism has not ended. But he warns that investors can no longer assume it will continue as it has before, and recommends that if you don’t have the answers, the safest approach is to diversify more, especially when the course of the war remains so uncertain.

The opinions or views expressed are provided for information purposes only and are subject to change without notice. This information is not intended to constitute advice or a personal recommendation, and it should not be relied upon as such when entering into a transaction or making any investment decision. While every effort has been made to ensure that the information provided is accurate and up to date, it may become inaccurate in the future due to changes. This document has been approved for issue in South Africa by Stonehage Fleming Investment Management (South Africa) (Pty) Ltd, an authorised Financial Services Provider (FSP No. 42847). Copyright © Stonehage Fleming 2026