M&G Says Markets Not Pricing Growth Risk of Extended War

M&G’s multi-asset fund manager warns markets are underestimating economic risks from the prolonged US-Israel-Iran conflict now in its fourth week. While investors focus on disinflation risks, growth threats from extended geopolitical tensions remain unpriced, creating potential blind spots in equity and bond valuations. Maria Municchi highlights a disconnect between market sentiment and real-world escalation risks, suggesting current pricing models fail to account for prolonged conflict scenarios. Equities and bonds face volatility as traditional risk assessments overlook secondary effects like supply chain disruptions and energy price spikes tied to Middle East instability. The analysis implies a need for portfolio adjustments to hedge against underpriced growth risks, particularly if the war drags beyond initial market expectations.