War, Iran and an Orange Man

I’ve deliberately held off writing about what’s happening in Iran.

Partly because I don’t like reacting to headlines. And partly because, initially, it felt like something that might pass without any real impact on day-to-day financial decisions here in the UK.

But it’s starting to look like this may run for longer — and when that’s the case, it’s worth stepping back and thinking properly about what it actually means.

I'm trying not to get political or emotional (I got that out in the headline), and just give you the financial impact below.

Where this impacts you?

For most high earners in the UK, global conflict only matters if it filters through into a few key things:

• Inflation

• Interest rates

• Cost of living

• Investment returns

All of these are likely to be impacted by war in the Middle East.

Because with anything involving the Middle East, the pressure point is energy.

If energy prices rise, inflation tends to follow. Not dramatically overnight, but enough to change the path we were on.

We had been moving towards a world where inflation was easing and interest rates could gradually come down.

This war has slowed this process and early indications are, it could even reverse it.

Higher inflation = Higher interest rates.

Your mortgage and interest rates

Interest rates have already spiked, increasing over 1% in some instances.

Whether this is temporary or more permanent, only time will tell.

For anyone with a mortgage, this matters — particularly if you’re:

• Remortgaging in the next 12 months

• On a variable rate

• Or considering a move

As ever, it's important to start the process early and be realistic.

People get caught out because expectations are too optimistic.

Tax, glorious tax

Frozen tax thresholds in an inflationary environment. Not good news for earners.

While inflation and rates move around, tax policy may remain unchanged. Thresholds are frozen until 2031.

So in practice:

• Earnings rise over time (salary increases, bonuses, promotions)

• More of that income is pulled into higher tax bands

Without any announcement, you gradually pay:

• 40% tax on more of your income

• Potentially 45% sooner than expected

Inflation is great to increase the tax received,, but if higher interest rates follow upwards, Rachel Reeves will need more money than ever to service our national debt.

Your investments may go down further

Investment markets don’t like uncertainty.

Periods like this often lead to:

• Increased volatility

• Short-term dips in investment values

A client exclaimed 'my pension went down 7% this week'.

Always keep in mind

• The past 10 years have been AMAZING for investment returns

• Markets fall by 10%+ almost EVERY year

• Assets are actually on SALE

Temporary declines in the value of investments are expected.

It’s unlikely you’re relying on your investments to fund your lifestyle today. Your income is doing that.

Meanwhile, you can keep buying assets that you're going to need in the future. Using regular pension contributions and investments to buy at at a discount.

Your investments still have time.

Time to recover. Time to compound. Time to benefit from staying invested rather than reacting.

These periods are simply part of the process, not a signal to change direction.

What you can do right now

You don’t need to predict what happens next globally. But you do need to be clear on your own position.

In practical terms:

1. Review and stress-test your mortgage. If rates increase, would that create pressure? If yes, it’s better to adjust early than react later.

2. Be deliberate with tax planning. Pensions, ISAs, and how bonuses are structured all become more important when tax thresholds are frozen.

3. Maintain flexibility in your finances. An emergency fund in cash savings and being able to save every month is a super power. Maintain it.

4. Stay consistent with investing. Short-term performance is unpredictable. Take advantage of the downturn and buy at a discount.

There's always something ...

You bet there is. Life has a way of testing us and this is just another example.

There is always something in the background, but the people who tend to end up in the strongest financial position aren't those who react.

They’re the ones who:

• Make decisions based on their own numbers

• Adjust to life, not headlines

• Stay consistent

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Risk warnings

Investments do not give the same capital security as cash deposits. Investments carry risks. The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested. Tax rates may change in the future.

If you do not keep up payments on your mortgage, your home could be repossessed.

The above article is not financial advice. If you need financial advice, please see an independent financial adviser (like us!).