It has been a tumultuous start to March 2026 that none of us would have expected. On the surface, the world appears to be in turmoil —war in Ukraine, War in Gaza, War in Pakistan and Afghanistan, and now war between the US/Israel and Iran! Market reaction on one side, the human tragedy this has and is creating is inexcusable! However, I will leave politics to lesser minds and focus on remaining hopeful and sane!
Markets have certainly picked up volatility once again despite 2025 being a fairly subdued year with regard to market movements. The uncertainty, especially now with Iran and the restriction in supply of oil and gas through the Strait of Hormuz, is driving consternation and hence a downturn in equity markets globally. This passageway is responsible for about 20% of the world’s oil supply and similar for gas.
This has further exacerbated the worry that already existed before the US/Israel attack on Iran on the significant spend on AI and concerns around monetization of this in due course to warrant the lofty prices that these technology stocks have been commanding in recent times.
Why are markets so concerned about oil in this conflict? We have already experienced an energy crisis when Russian invaded the Ukraine back in 2022 and Europe had to bear a winter without Russian oil and gas to keep them warm. We recovered from that quite well and markets put that aside despite the conflict still raging in that region.
An increase in energy costs has a two-pronged impact on economies. It increases inflation and hence the cost of living. It also slows economic growth as input costs go up and people spend less due to the cost-of-living pressures. In a world with significant leverage, increases in interest rate cycle can mean a significant risk to the economy. We are already in the tightening cycle in Australia, but the US has been cutting interest rates and expecting further rates cuts in coming months. This could now be at risk. See the chart below. 
However, all this is not new! History repeats itself and those with patience and diligence can benefit in times of uncertainties from an economic perspective. See the chart below that depicts market events and ensuing market movements.
As you can see from the above, markets tend to move onwards and upwards as they capture human endeavour to succeed. Since 1940, the S&P 500 has been higher 12 months after a major geopolitical crisis 85% of the time. That is a very telling picture and one that beckons us to remain calm and adhere to our longer-term investment thesis.
Where do we see risks, and to balance things out, opportunities. Notwithstanding the short-term volatility and inherent risks of deploying capital which could continue to fall in value in the short run, we take a longer-term view. We see risks in overvalued stocks as these have the propensity to correct the most in times like these. Investors have plowed into the big end of town in the last 2 years in particular and tend to exit at the worst possible time (times like these) and cause a correction. Whilst the AI revolution has been likened to the discovery of electricity and expected to provide an unprecedented economic boom over the next decade, there will off course be winners and losers out of this.
Our focus is to invest with an active and tactical approach as opposed to investing across a broad market or index. This has become increasingly more important, especially in light of the current situation. Furthermore, this approach helps us to focus on areas of growth and opportunity whilst mitigating risk across a broad spectrum of companies and exposures.
Concentrating on alternate investments, such as private equity, defensive alternatives, and property, allows us to reposition into a more value-driven exposure by adding to those assets essentially ‘forgotten’ by markets, including small and mid-cap stocks, as these offer better buying opportunities at a better price point.
Therefore, remain true to your longer-term goals and investment objectives and let the noise come in one ear and go out the other.
As always, here are a couple of quotes to put things in perspective.
Stay safe and stay well.
“When asked what the stock market will do: It will fluctuate” —JP Morgan
“Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised” —Warren Buffet