Investors are showing a dangerous level of complacency over escalating geopolitical tensions in the Middle East, despite mounting evidence that recent US airstrikes on Iran failed to achieve their intended objectives, according to Jake McLaughlin, Executive Director of deVere Portugal.

Speaking in the wake of newly released intelligence assessments and independent satellite analysis, McLaughlin says markets are not fully pricing the potential fallout from the situation.

“The response from investors so far has been alarmingly muted,” says McLaughlin. “We’re talking about military action targeting Iran’s nuclear infrastructure—a development that would normally trigger heightened risk aversion across global asset classes. Yet markets are behaving as if it’s business as usual.”

Indeed, several major equity indices have recently broken through key technical levels. The S&P 500 has surged to fresh all-time highs, recovering fully from its spring slump and now trading above levels last seen before the U.S. tariff announcements. Similarly, the FTSE 100 is hovering just beneath its June record, driven by strong performance in financials and energy stocks. This bullish momentum underscores the extent to which investors are discounting geopolitical risk.

According to reports from the Pentagon’s Defense Intelligence Agency, the June 22 airstrikes ordered by US President Donald Trump inflicted visible damage at sites like Fordow and Natanz but fell short of delivering a decisive blow to Iran’s most fortified nuclear facilities. Satellite imagery released in recent days supports this assessment, showing surface-level impact but no confirmation that underground complexes were breached.

McLaughlin believes this lack of clarity heightens the risk of further escalation.

“History shows that partial strikes which fail to neutralize critical infrastructure often lead to a retaliatory cycle,” he says. “Iran’s likely next step is to accelerate its nuclear program in defiance, increasing the probability of further military action and regional instability.”

Despite these concerns, traditional risk indicators remain surprisingly stable. Oil prices continue to trade well below levels typically seen during major Middle East confrontations, while risk-sensitive currencies and global equities show little sign of defensive positioning.

“This disconnect is striking,” McLaughlin adds. “Energy markets aren’t reflecting the scale of potential disruption. Nor are equity markets showing the kind of rotation into safe havens you’d expect when geopolitical risk is rising on multiple fronts.”

Beyond the Iran situation, McLaughlin points to a broader trend of investor complacency.

“We’re seeing the same relaxed attitude towards US-China trade tensions, which are heating up again with new tariff threats,” he says. “Europe’s energy security concerns are deepening, with gas storage running below seasonal norms and political divisions widening. Add to that the softening economic data out of both the eurozone and China, and it’s clear that risks are accumulating fast.”

McLaughlin warns that this false sense of market calm could leave investors dangerously exposed if sentiment turns.

“Complacency itself is a position—and it’s a risky one,” he explains. “Markets can reprice rapidly and severely when risk aversion finally kicks in.”

He is advising clients to take proactive steps to protect portfolios.

“This is not the time to sit back and hope for stability,” says McLaughlin. “Investors should be reviewing allocations now, increasing exposure to downside protection strategies and ensuring portfolios are globally diversified.”

While geopolitical headlines can sometimes spark short-lived volatility, McLaughlin argues that the current environment is different.

“We’re not dealing with a single flashpoint,” he says. “This is a convergence of geopolitical, economic, and market risks that are being overlooked.”

With further developments likely in the coming weeks, especially regarding Iran’s nuclear program and potential US responses, McLaughlin’s message to investors is blunt.

“This is not a drill,” he says. “The risk environment is shifting quickly, and investors who ignore these warning signs could find themselves reacting too late.”

You can contact Jake with any questions here: jake.mclaughlin@devere-portugal.pt or the deVere Portugal Office +351 22 110 9071 or book a meeting with him here https://calendly.com/jake-mclaughlin/review