What Advisors Are Watching as the Iran War Escalates

Keep calm, and stay invested.

Financial plans aren’t meant to be rewritten in the heat of the moment, and even as oil prices and global supply chains are disrupted by the Iran War, most advisors say sticking to a client’s existing strategy is wise. Yet the uncertainty of the conflict’s duration and impact means there are both opportunities and risks worth considering for long- and short-term portfolio management. While the market is holding up remarkably well, especially in light of the significant impact to the energy sector, some advisors are wondering if the markets are actually under-reacting.

“We don’t like to predict these things, but it is a thought-provoking question we’re asking,” said James St. Aubin, CIO of Ocean Park Asset Management. “The market isn’t expecting a long-lasting, protracted disruption of oil out of the Middle East, and maybe that’s overly optimistic on some level.” He noted that during the Yom Kippur War of 1973, there was not a huge market reaction, but there was a significant decline once the Arab oil embargo began. A year later, the S&P was down 40%.

Gulp.

The Strait and Narrow

After large-scale military strikes by the US and Israel, Iran has essentially halted commercial traffic through the Strait of Hormuz, a key global oil chokepoint. Oil prices have surged, with Brent crude climbing above $100 per barrel, a peak not seen since Russia’s invasion of Ukraine in 2022. 

For those considering adjustments, Ben Sullivan, CIO at AE Wealth Management, suggested managed futures offering commodities and currency exposure as an offensive strategy. Defensive sectors like utilities and healthcare, with predictable cash flows and strong balance sheets, can help stabilize portfolios, he said.

A prolonged conflict could hurt growth-sensitive areas such as small caps, said Stephen Kolano, CIO at Integrated Partners. “The longer energy prices stay elevated, the greater the potential impact on US and global economic growth,” he told Advisor Upside. Markets haven’t been rocked dramatically yet, however:

• Gold spiked after the initial US air strikes in February, but has since retreated.
• Investors aren’t rushing to fixed income as a safe haven either, and 10-year Treasury yields have risen sharply, driven by inflation expectations.

Can You Feel It? While the best portfolio decisions are made before a crisis begins, there has been heightened interest in businesses with real assets and durable cash flows, especially companies focused on US-based energy infrastructure, said Trevor Gunter, founder of Four Pines Financial. “In a market worried about conflict abroad and AI disruption at home, those kinds of companies feel more tangible,” he told Advisor Upside.