You've likely spent much of the past few days following the events unfolding in the Middle East. We wanted to share our perspective on the situation, what it means for markets, and what, if anything, it should mean for your portfolio.
What Happened
The U.S. and Israel launched "Operation Epic Fury"—a broad military campaign targeting Iranian nuclear facilities and military infrastructure that resulted in the killing of Supreme Leader Ali Khamenei.
Iran's response has been notably more aggressive than prior exchanges—firing missiles not only at Israel, but at the UAE, Qatar, Bahrain, Kuwait, and Saudi Arabia.
Importantly, tanker traffic through the Strait of Hormuz largely came to a halt after Iran attacked multiple oil tankers and formally declared the Strait closed, though the duration and enforcement of that closure remain uncertain.
Energy Is the Key Risk
Iran accounts for roughly 3% of global oil production, but its real strategic leverage lies in the Strait of Hormuz, through which approximately 20% of the world's oil and LNG flows every day.
The oil market does have some buffers: Gulf exporters had sharply increased loadings in the weeks prior, global floating inventories have grown, OPEC+ has committed to adding supply, and the U.S. and China both hold strategic reserves.
Still, analysts estimate a sustained closure of the Strait could push prices above $100 per barrel—a shock that could ripple through inflation, consumer spending, and growth.
Early Market Reaction
Equities sold off initially but recovered much of their losses, while oil spiked roughly 7–8%. Energy and defense names outperformed. Emerging markets and companies with significant exposure to the Middle East may face acute pressure.
Some of this had already been priced in. After entering 2026 near multi-year lows due to oversupply concerns, oil prices had rallied 19% since January, as escalating tensions with Iran steadily injected a geopolitical risk premium well before the strikes began.
In addition, institutional investors had grown increasingly cautious heading into the conflict, with many having already de-risked in an attempt to navigate a market that has rapidly rotated away from tech.
That repositioning may have softened some of the initial blow, but this conflict arrives on top of an already unsettled backdrop.
What History Tells Us
Geopolitical shocks can be alarming, but their lasting impact on investment markets has historically been limited. Analysis of major geopolitical events since Pearl Harbor shows an average market drawdown of roughly 5%, with a median recovery time of just 19 days. The 2003 Iraq invasion, the 1990 Gulf War, and even the 1973 oil embargo all created volatility, but none prevented markets from ultimately reaching new highs.
Markets ultimately price the trajectory of corporate earnings, which are driven by fundamentals—consumer spending, employment, business investment, and productivity. The critical variable is whether energy disruption proves severe and prolonged enough to work its way into those underlying drivers.
What We're Watching
A few factors will determine whether this remains a short-term volatility event or something more consequential:
Hormuz Traffic
How quickly tanker traffic resumes will be a critical signal. A brief disruption is manageable; a sustained closure will be difficult for energy markets to digest.
Escalation Breadth
The conflict has already spread across the Gulf and into Lebanon, with Hezbollah entering the fight. Any further expansion to additional regional actors, or direct threats to U.S. forces, could change the calculus significantly.
Succession in Tehran
The confirmed deaths of Khamenei and senior IRGC leadership create genuine uncertainty about who is making decisions and how centralized Iran's response will be. Fragmentation of command could mean either de-escalation or unpredictable action.
U.S. Policy Signals
The Trump administration has consistently signaled a desire for lower oil prices. A sustained spike creates pressure to move toward a faster resolution, even if it's one that falls short of their broader strategic objectives.
What This Means for You
Geopolitical volatility is unsettling, but the greatest harm can come from selling into panic and missing the recovery. By the time an "all clear" signal emerges, markets have often already rebounded.
A disciplined investment strategy matched to your risk profile is built precisely for moments like this, allowing you to remain invested, systematically rebalance, and deploy any available cash into assets that have become oversold.
We will continue monitoring the factors above for any meaningful shifts in the outlook. In the meantime, please don't hesitate to reach out if you've had any changes to your near-term liquidity needs or would like to discuss your investment approach. We're here to help you navigate whatever comes next, and keep you on track toward your long-term goals.
Disclosure:
This communication is for informational purposes only and does not constitute investment advice or a recommendation to buy, hold, or sell any security. Forward-looking statements involve risks and uncertainties. Past performance is not indicative of future results.
.svg)
.svg)
.svg)
