The Iran conflict: our response

Federated Hermes investment teams are navigating the market disruption from the US and Israel joint attack on Iran with a clear emphasis on risk control and disciplined valuation. They are working to limit downside in a backdrop of higher oil prices, elevated inflation risk and greater volatility, while favoring markets less exposed to geopolitical shocks. Across portfolios, they are tightening quality standards, monitoring private credit valuations and maintaining liquidity and diversification as input costs rise for energy-intensive sectors.

At the same time, they see opportunities in higher yields across investment-grade bonds and high-quality securitized assets, as well as selective duration exposure where volatility has improved compensation. Elevated geopolitical tension is also reinforcing long-term themes in defense spending and commodity-linked emerging markets, where dislocations could offer compelling total return potential when approached with careful risk management.