03/04/2026
Geopolitical worries rise after attack on Iran
The United States and Israel launched an attack on Iran over the weekend, prompting Iran to respond with counterattacks against multiple cities in the Middle East.
First and foremost, we know that this is a human tragedy, and there is uncertainty on how long this conflict will last, and what the total loss may look like. As we help our clients navigate this geopolitical crisis, we'll continue to highlight key market perspectives.
Iran is a sizeable oil producer, the fourth largest within OPEC, accounting for roughly 4% of global oil supplies, with about 80% of its exports going to China. The country also sits in a strategically important position: it controls access to the Strait of Hormuz, a critical chokepoint through which approximately 20% of the world’s oil supply passes.
Three Key Market Implications:
1) We believe the biggest impacts may be seen in oil and commodity markets.
We have already seen WTI crude oil move higher about 15% this year, prior to the Iran conflict. And we saw another 6%-plus move higher after the conflict began.
Despite the fluid situation, history offers perspective.
Over the past 15 years, similar geopolitical shocks have not produced sustained oil price surges or prolonged market turmoil.
Structural changes in the economy also provide resilience:
The U.S. and Canada have been net petroleum exporters for several years. Energy spending as a share of GDP has declined due to efficiency improvements and a shift toward services.
The U.S. Energy Information Administration (EIA) reports that the global oil market is currently in significant oversupply, a trend expected to continue through 2026.
With affordability remaining a key issue ahead of the November mid‑term elections, the administration is likely seeking to prevent a sustained rise in oil prices.
2) Markets may be volatile but are reacting in line with expectations.
Markets began the day sharply lower, but have since recovered, with the S&P 500 and Canadian TSX ending modestly higher on Monday. The S&P 500 is still up about 17% over the past year and remains just 2%-3% below all-time highs. The U.S. dollar was also higher, while global equities closed sharply lower, given most of these economies are more heavily reliant on oil imports than the U.S. or Canada. We also saw some flight-to-safety in precious metals, with spot gold prices up modestly around 1%.
Of note, U.S. and Canadian government bond yields were sharply higher as prices moved lower. This may be in part because there is some fear of higher oil prices leading to higher inflationary pressures. However, this is a more likely scenario only if higher energy prices are sustained for an extended period. Even with WTI now at around $71, prices are below the five-year average of $76. A sustained move to over $100, for example, would present a much more acute disruption in our view, although we are far from these levels and would not expect that outsized move as our base case.
3) Finally, we know geopolitical headlines can create noise and anxiety – staying calm, staying diversified, and staying invested matters.
We know playing politics with portfolios is never a great investment strategy.
We continue to see opportunities across markets and asset classes, including in areas like cyclical and value sectors, which can hold up better as energy markets rise; U.S. mid-cap stocks, which have more domestic exposure; and emerging markets and parts of international equities, which have exposure to global technology opportunities.
Bottom line:
While the situation remains dynamic, both historical patterns and market fundamentals offer some reassurance. Geopolitical flare‑ups can create volatility, but recent episodes have produced limited and short‑lived market impacts.
We can help you make sure you have a solid financial plan and diversified investment strategy in place to navigate uncertainty that may lie ahead.
Connect with me for further insights via email [email protected] or by calling the office on (506) 474 2436 📈 🤓
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