When Lloyds Banking Group (LSE: LLOY) shares soared to a five-year high of over 114p in February, it looked like the time to buy them cheap might be over. But since then, we’ve seen the price tumble 15%, to under 100p again.

But are there really any serious threats now to the long-term outlook for Lloyds? Let’s take a look.

What just happened

The Middle East conflict is clearly the big thing in the news. Aside from the terrible human toll, it’s also helped drive the FTSE 100 down around 4.5% from its all-time high of over 10,900 points in late February. But it’s still holding above 10,000. And I take that as a testament to the strength of the UK stock market right now. Oil prices are soaring, economic growth is faltering, and interest rate cuts look out of the question for now. In the circumstances, I really think we could have seen a significantly bigger drop.

But when macro events hit stock markets, the financial sector always seems to be one of the first to suffer. It does, after all, underpin all the others.

And Lloyds isn’t the biggest banking faller. No, Barclays shares are down 19% at the time of writing — and they’ve been down as much as 25%. That’s probably due to a wider exposure to international corporate banking, which opens up more risk. Lloyds’ focus on UK retail banking and mortgage lending might seem relatively dull. But in tough times, the strategy can offer a welcome safety margin.

What next?

The question is, what should we do about it? The key for me is to try to ignore short-term events — switch the TV off, or at least try not to let the news impact my investing decisions too much.

Looking at Lloyds shares from that angle, I’d thought they were perhaps getting a bit high in their valuation. It’s been nowhere near enough to persuade me to sell — though some investors will have taken profits recently, helping knock the shares back a bit.

But my general feel has been… it’s still a good long-term business, and investors should consider buying on the dips. So is the current dip a big enough one? After all, Lloyds has actually fallen less than 1% since the start of 2026.

Valuation

After the share price retreat, we’re now looking at a forward price-to-earnings (P/E) ratio of under 10 again. And it would reduce to only a bit over seven on 2028 forecasts.

Based on current events, it might be fair to judge Lloyds shares as at around fair value right now. Especially with the big dividend yield gone — the forecast 3.8% isn’t bad, but there are much bigger ones out there.

It all depends on our longer-term outlook — and current forecasts put me in a positive mood. I really don’t see a great threat to Lloyds’ business here. Maybe growth will be set back a little. But investors like me, who still expect good things in the next decade, could do well to consider buying now.