NEWS + VIEWS – 13/03/2026
MARKETS
Geopolitical tensions in the Middle East and concerns around disruptions to shipping through the Strait of Hormuz, a critical route for global oil exports, pushed oil prices to US$100 per barrel of Brent crude and increased fears of renewed inflation. As a result, global share markets experienced declines and increased volatility during the week.
Iran is using the effective closure of the Strait as leverage against the US and Israel while oil producers in the region are cutting production because their crude has nowhere to go. Countries around the world are trying to make up for that, and the International Energy Agency said that its members would release 400 million barrels of oil from stockpiles built for such emergencies. But such moves are short-term fixes and if the Strait remains closed, oil prices could rise much higher.
WARS AND MARKET SELL-OFFS
One of the most predictable patterns in global finance after war breaks out is that energy prices spike and markets take a beating. For newer investors, the reaction to the conflict in the Middle East may feel extreme. However, it’s a pattern more experienced investors have seen many times before. Markets tend to react quickly to geopolitical shocks, but the damage rarely lasts as long as investors first fear.
Oil up, equities down
When conflict erupts, markets immediately begin pricing the most obvious risk: energy disruption. Oil and gas prices surge on fears that supply is at risk, while equities are sold off with the steepest declines in sectors most exposed to fuel costs including airlines, shipping and logistics. Bond markets often sell off as well, signalling rising inflation fears rather than concerns about economic growth. And then there’s the US dollar, which tends to reclaim its safe-haven status during periods of geopolitical stress.
But every event has its nuances. This time around, one traditional safe haven hasn’t behaved as expected: gold. Despite heightened geopolitical uncertainty, the precious metal has actually slipped. Bell Potter strategist Rob Crookston believes the price of gold has fallen because the spike in oil prices sparked fears of higher-for-longer interest rates and a surging US dollar. This prompted investors to liquidate the non-yielding metal for cash and to meet margin calls.
The pattern investors forget
While the headlines seem dramatic, history suggests that these shocks rarely cause lasting damage to equity markets. Markets fall initially, often sharply, before recovering once it becomes clear that the conflict won’t trigger a broader economic crisis. The table below shows a consistent pattern of reactions in the S&P 500 index to the major geopolitical events over the past three decades.
In each case where the conflict was contained and did not coincide with a broader financial crisis, equity markets recovered, remembering that the Gulf War period coincided with the early 1990s recession.
What should investors do?
When geopolitical shocks hit markets, should we put on our trading hats and start going long and short oil and equities? You could, but you would be doing it at your own risk. As Crookston points out, the real challenge is the speed of the market’s response to geopolitical news. Things can change in the blink of an eye.
Sentiment can shift on a single headline. The risk is that investors miss the sharpest leg of the rebound, which has historically proven more damaging to long-term performance than weathering the initial volatility. That’s not to say that the Strait of Hormuz, through which around 20% of the world’s oil supply passes, remains a key vulnerability. A sustained disruption would represent a real energy shock, with implications for inflation, growth, rates and equity prices.
But history suggests that the start of a conflict is rarely a catalyst for a prolonged sell-off. Well-diversified portfolios, held with discipline through periods of uncertainty, consistently produce better outcomes than those managed reactively.
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