Keir Starmer has belatedly acknowledged Brexit's deep economic damage, while investors brace for the stagflationary shock from the Iran conflict. Airlines already face soaring fuel costs, and markets show concern about inflation returning to the financial system. The Iran war threatens to become the biggest stagflationary shock the world has seen in five decades.

Historical data reveals only eight stagflation years produced positive stock market performances over the past century. Investors should consider sectors that historically hold up better during these periods: utilities, consumer staples, energy, materials and healthcare. Consumer discretionary stocks, IT and financials typically suffer most under these conditions.

The UK's FTSE 100 remains up 4% this year while US markets are down 4%, suggesting some protection against the stagflation threat. Despite this, UK housebuilders are taking a beating. Over 90% of European sectors have already been impacted, raising questions whether stagflation risk has been excessively priced in. Uncertainty remains as the US strategy appears unclear.