US and Israel strike Iran: Implications and what to watch

On 28 February 2026, US and Israeli forces struck multiple targets in Iran. Several sources have described the strikes as significant in scale. The targets included missile and air defence infrastructure, as well as senior political and military sites. Since, the death of Iranian Supreme Leader Ayatollah Ali Khamenei has been confirmed. In retaliation, Iran has launched missiles and drones at Israel, US assets, and other countries across the Gulf.

Implications for the global and financial markets

As the conflict involving Iran, Israel and the US continued through March, markets weakened. The NZX50 fell noticeably and global markets showed similar declines. Worries about oil supply, especially traffic through the Strait of Hormuz (about 20% of global seaborne oil), have kept oil prices high. Mercer now sees weaker global growth and higher inflation expectations as a result of rising oil prices. Gold fell in March, surprising investors who often treat it as a safe‑haven asset.

Diplomatic prospects remain unclear. A US announcement of talks with Iran briefly raised hopes for a resolution, but Iran’s denial of those talks has tempered sentiment. It is still uncertain whether a deal to end the conflict will be reached.

Considerations

Mercer’s investment team are meeting regularly and as required, closely monitoring developments.

Mercer is not making knee-jerk portfolio changes based on headlines and the approach remains disciplined and diversified, with risk management strategies focused on the long term.

While the portfolios may experience short-term volatility as markets respond to events, they are designed to aim to withstand uncertainty, including geopolitical events, over long-term horizons.

In past conflicts, making large, rapid changes to investments early on has generally not supported long-term results. Mercer has found that staying diversified and making careful, evidence-based adjustments when necessary is a more effective approach.

Member guidance

Mercer encourages members to stay the course—portfolios are designed for uncertainty through diversification and long-term positioning.

Avoid reacting to short-term headlines. Staying invested through volatility has historically been important to achieving beneficial long-term outcomes.

If you already work with a financial adviser, feel free to reach out to them. Mercer's financial advice team can provide specific advice in relation to your savings in the Scheme and general information on other types of financial products. For more information on navigating market volatility, or to request a call back from one of Mercer’s financial advisers, you can call the Helpline on 0800 405 845.