What will war with Iraq do to your investment portfolio?

Thousands of investors are, as John Gilbert says, in uncharted territory. "Now is a volatile time because of events in the Gulf, but I have learnt that if you stick money aside it will be there later on. With due respect to fund managers, they don't really know what is going to happen."

Mr Gilbert, a 63-year-old insurance broker in Bourne, Lincolnshire, is among the army of investors considering what to do about their portfolios as the onset of war with Iraq appears to be approaching.

And a survey by Torquil Clark, the Wolverhampton-based financial adviser, shows that by a 15-to-10 majority, investment professionals have been quietly adjusting their shareholdings to ward off the worst-case scenarios a war might deliver.

A sizeable minority is adamant that war is irrelevant to their calculations, but Gil Knight at AIB Govett spoke for a rising body of opinion that is becoming more concerned. "The main worry is a long, drawn-out war of more than two weeks, with house-to-house street fighting.

"This situation could result in higher oil prices as well as further weakening of the US dollar. The global equity markets would also not respond favourably. The consensus here [at AIB] is that any war would be short, but I am somewhat concerned that this attitude is complacent."

The length of the war is a major preoccupation, but one which is also being seen as a source of opportunities. Adrian Patterson, manager of the Artemis UK Growth fund, says: "I am definitely of the opinion there will be a war. I feel the question is whether the war will be short or protracted. Market consensus suggests it will be over quickly, but I have positioned my portfolio so should the war drag on and the market decline, I can take advantage."

Fidelity says that before Christmas its senior manager, Anthony Bolton, had been worried that the share price of many big companies had reflected the prospects of war. Then he became more satisfied this was being priced in, and is looking very carefully at firms with significant overseas earnings. But he is less defensive at the margin than he was.

At Framlington, George Luckraft, the manager of the Equity Income & High Income funds, says: "The market has discounted a short, successful war. I will not be buying or selling anything for Iraq reasons. But there is the risk of terrorist attacks and this would hit the whole of the holiday and travel sector."

Jupiter Asset Management's John Hamilton, the manager of the corporate bond fund, says: "The key consideration is the length of any conflict and whether we are entering an extended period of high oil prices or whether the conflict is short-lived and the present high level of oil prices proves to be transitory. My feeling is that markets are more disposed to the latter outcome and I tend to agree with this."

At New Star Asset Management, James Gledhill says the talk of war was more damaging than war itself. He says: "It impacts more on the type of bond we are holding. If the uncertainty of whether or not there is a war was not there I would possibly be less cautious about the world economic outlook.

"At a stock level, we are not holding British Airways. The threat of terrorism as a response to military action is a sword of Damocles hanging over that industry."

Despite all these concerns, Mr Gilbert still likes to have a good spread of smaller companies because that suits his temperament.

But Philippa Gee, a Torquil Clark's investment strategist, says: "For those who are well-placed already, considering a sale to hold the money in cash and investing again is, I would suggest, the wrong approach, because it will trigger additional charges, create losses and you will unlikely to have access to instant transactions, meaning that you miss the boat on the way out and on the way in.

"I would suggest you sit tight and leave the fund manager to deal with the news as it happens. For those who are pondering new investments, there is no point in missing out on your Isa allowance for fear of what may happen."