Investors have been warned not to be too optimistic after last week's stock market resurgence, with another weekend of uncertainty in the Middle East wreaking further havoc.
London's FTSE 100 and the US S&P 500, among others, had strong ends to the week as sentiment turned positive on hopes of the Strait of Hormuz reopening.
But that situation was quickly reversed: Iran said it was closed once again and refused to continue talks. Meanwhile, the United States says it has seized an Iranian ship that tried to evade the blockade.
Stock markets took a hit earlier this week and experts warn that investors will need “great reserves of patience” before the whole situation comes to an end.
The FTSE 100 was down more than 0.5 per cent at 10am BST on Monday, with European shares suffering further. France's CAC 40, Germany's DAX and Spain's IBEX 35 fell more than 1 percent, and the Euro Stoxx 50 fell 1.3 percent.
In the United States, futures show that indices are expected to fall when markets open later; the Dow Jones, Nasdaq and S&P 500 will fall more than 0.5 percent.
Richard Hunter, head of markets at Interactive Investor, said it continued to mean an up-and-down period for investing, with many markets on the other end of the seesaw from oil prices, which rose once again on Monday.
“A very familiar theme has emerged: markets take two steps forward and then one step back, and almost entirely driven by the flow of news coming out of the Middle East,” he said.
“On Friday, Iran reportedly declared the Strait of Hormuz 'fully open', lighting a fire in stocks and particularly those affected by the conflict so far, such as airlines and cruise operators, as oil prices plummeted on the prospect of some kind of return to normality.”
However, for those investing for the long term, the goal remains to avoid the temptation to sell into recent poor performers, with London's main index up more than 7 percent for the year despite problems that have seen shares fall.
“While short-term traders are trying to navigate a dangerous course involving violent swings and uncertainty, long-term investors tend to look through the noise and focus on a return to normality with a relatively benign economic backdrop at present. The FTSE100 has been something of a poster child for this investment mentality and, despite a weaker opening following the events of the weekend, the index remains firmly ahead with 7 per cent so far this year,” he added.
Derren Nathan, head of equity research at Hargreaves Lansdown, said future talks between nations would dictate the markets' next moves.
“Rhetoric has intensified once again as attention turns to a second round of negotiations between Tehran and Washington in Pakistan, but it is not entirely clear whether these discussions will take place. It remains to be seen whether this impasse turns out to be simply a detour on the path to a resolution, but greater volatility would seem the most likely outcome,” he said.
A quick resolution was initially hoped, but this has since proven impossible. Susannah Streeter, chief investment strategist at Wealth Club, reminded investors that cutting through the noise is a key trait in these times.
“Great reserves of patience are needed, but with some industries, such as airlines, facing shortages of jet fuel, these are tense times and valuations reflect that,” he said. “Although indices in Asia remained stable, with investors still focused on expectations of a resumption of negotiations, stocks on Wall Street appear poised to stumble, with S&P 500 futures indicating a small pullback from all-time highs.”
“It appears that last week's market enthusiasm for the reopening of the Strait of Hormuz may have been premature,” added AJ Bell chief investment officer Russ Mould.
