The Ibex 35 has come under pressure this week as geopolitical tensions in the Middle East pushed energy prices higher and renewed concerns about eurozone inflation, prompting investors to reassess market risks.

Brent crude has surged nearly 20% over the past week, surpassing $84 per barrel, while TTF natural gas prices jumped almost 60%, reaching 50€ per megawatt-hour, according to CaixaBank Research. The sharp rise reflects worries over potential disruptions to energy supplies as the US-Israel led attack at Iran continues with no end in sight.

“These increases in energy prices are driving short-term inflation risks in the eurozone,” CaixaBank Research said in its weekly report, noting that futures markets now price oil and gas significantly higher for 2026 compared with pre-conflict levels.

ECB Chief Economist Philip Lane said in a recent interview that the conflict puts upward pressure on inflation while potentially weakening economic activity in the eurozone. He adds that the magnitude of these effects will depend on the duration and intensity of the conflict.

The combination of rising energy costs and the potential for tighter monetary policy has led to market volatility. Government bond yields across Europe and the US have increased, while futures markets signal nearly a 50% probability that the ECB could raise its deposit rate from 2.00% to 2.25% by the end of 2026, according to CaixaBank Research.

What is portfolio rebalancing—and how it applies to the Ibex 35

Portfolio rebalancing is the process of adjusting the mix of assets in an investment portfolio to maintain a target allocation based on your financial goals and risk tolerance. Over time, some investments may grow faster than others, causing your portfolio to drift from its intended balance. Rebalancing restores the original proportions of equities, bonds, cash, and other assets.

The main benefits of portfolio rebalancing include:

• Risk management: Keeps your portfolio aligned with your risk tolerance.

• Discipline: Prevents emotional decisions during market swings.

• Potential for better returns: Buying underpriced assets and trimming overweight positions can improve long-term performance.

While rebalancing can be done manually, many investors use automated tools or consult financial advisors to ensure decisions align with their goals and market conditions. Especially amid geopolitical risks like the Middle East conflict, regular rebalancing helps maintain a structured approach rather than reacting impulsively to market shocks.

Defensive positioning in the Ibex 35

Amid current market uncertainty, investors in the Ibex 35 may consider adjusting portfolio allocations toward more defensive sectors. Utilities and energy companies, for example, have shown relative resilience during periods of market stress.

• Iberdrola and Endesa are major utilities with stable revenues and long histories of dividends.

• Repsol has benefited from rising oil prices, providing a hedge against energy market volatility.

Even some of Spain’s largest firms—the so-called “Magnificent 5,” including Inditex, Banco Santander, BBVA, CaixaBank, and Iberdrola—have historically demonstrated resilience in volatile markets. Trade publication, Estrategias de Inversión, note that these companies’ scale, diversified operations, and strong balance sheets may help them withstand geopolitical shocks while maintaining core operations.

By combining rebalancing principles with defensive positioning, investors can manage risk more effectively in turbulent periods, such as the recent Ibex 35 dip amid rising energy prices and geopolitical tensions.

Volatility calls for calm, not panic

The current environment underscores that market volatility is a normal part of investing. Historical patterns show that reacting to short-term turbulence with panic selling can lock in losses. Long-term investors may use periods of volatility to review portfolios and ensure allocations align with their risk tolerance and investment horizon—without necessarily exiting core positions.