- WHERE WE LEFT OFF
In the opening days of the conflict between the United States, Israel, and Iran, we published our initial analysis “Navigating Market Volatility Amid Middle East Conflict” to provide context and guidance for investors.
Navigating market volatility amid Middle East conflict | Wealth 21
That article was written in the first week of the war, which began on 28 February 2026. At the time, equity markets had shown early resilience, oil prices were climbing, and gold had spiked to $5,419 USD before retracing to around $5,000 USD. We also outlined the impact of a disruption to the Strait of Hormuz, and made the case for staying invested through the volatility.
Nearly four weeks later, the situation has evolved. That being said, the advice remains as relevant now as it was on day one: the disciplined, long-term investor is best served by staying the course.
- WHAT HAS HAPPENED SINCE
The conflict has proven more protracted and geographically expansive than initial market pricing suggested. The US-Israeli strikes, which began on 28 February, have continued into their fourth week. Supreme Leader Khamenei was killed in the opening wave, and Iran has retaliated with sustained missile and drone barrages targeting Israel, US bases, and critically, neighbouring Gulf states including Saudi Arabia, the UAE, Kuwait, and Qatar.
The conflict has drawn in multiple countries. Hezbollah renewed hostilities from Lebanon, Iraq has become a secondary battleground, and Turkey had a ballistic missile intercepted in its airspace, prompting a NATO response. Commercial shipping through the Strait of Hormuz has been severely disrupted, with threats to destroy vessels attempting passage. The International Energy Agency has described the resulting supply shock as the largest in the history of the global oil market, with nearly 20 million barrels per day of crude and product flows disrupted.
As of the time of writing this, conflicting signals have emerged around potential peace talks. President Trump has postponed planned strikes on Iranian energy infrastructure for five days and claimed productive conversations with Tehran, though Iranian officials have publicly denied that formal negotiations have taken place. The situation remains fluid.
- HOW MARKETS ARE REACTING
Oil:
As we flagged in our initial analysis, Brent Crude was the most immediately impacted asset. The effective closure of the Strait of Hormuz has pushed Brent from around US$72 per barrel before the conflict to a peak above US$118 per barrel. As of late March, Brent has eased to around US$100–$105 per barrel following signals of potential de-escalation. However, prices remain extremely elevated. The US Energy Information Administration now forecasts Brent above US$95 per barrel for the next two months, declining into the second half of 2026 only if conflict-related disruptions ease.
Whilst headlines state that there is a disruption of roughly 20 million barrels per day, it is important to remember that this is a disruption rather than a total shortage. The effective net shortage is estimated at 10–12 million barrels per day. An alternative pipeline through routes such as the East-West Petroline, and the IEA’s coordinated emergency reserve release of approximately 400 million barrels has been able to offset some of the shortage. That being said, the shortage is significant, accounting for around 10% of the global daily demand. A material price correction is dependent upon resumed Strait transit, diplomatic resolution, or confirmed increases in export volumes.
Gold:
Gold’s behaviour since our initial paper has been one of the more counterintuitive developments. In the first paper, we noted gold’s initial spike to $5,419 USD and its retracement to $5,000 USD, which at the time we attributed to US Dollar strength. Since then, gold has fallen dramatically further, with a decline of more than 20% from its March peak. As of the time of writing this, gold is trading around $4,600 USD per ounce.
Despite being one of the most well-known safe-haven assets, gold has been caught in a liquidation cycle. Soaring oil prices have fed directly into inflation expectations, which in turn have pushed bond yields sharply higher. US Treasury yields have reached ten-month highs, increasing the opportunity cost of holding non-yielding assets like gold. Simultaneously, margin calls triggered by equity and commodity volatility have forced institutional investors to sell liquid positions to raise cash. This reinforces why single-asset bets, even on traditional safe havens, can be unreliable in crisis environments.
Equities:
The initial resilience we observed in equity markets during the first week has since given way. The S&P 500 has fallen approximately 6.8% from its January peak, recording its first four-week losing streak since 2023 and trading below its 200-day moving average for the first time since May. The Dow Jones Industrial Average has declined roughly 9% from its February high. The small-cap Russell 2000 has entered formal correction territory, falling more than 10% from its recent peak.
In Australia, the S&P/ASX 200 has declined approximately 8.9% since the conflict began, erasing more than $200 billion in market capitalisation from the top 500 listed companies. Sector dispersion has been extreme: ASX energy shares have surged approximately 17%, while materials stocks have fallen 19%. Financial and healthcare stocks have declined more modestly, in the range of 5-7%.
Despite these falls, context is important. Research compiled by Carson Group across 40 major geopolitical events over the past 85 years found that the S&P 500 lost an average of 0.9% in the first month following the onset of crisis but gained 3.4% across the subsequent six months. The historical track record of geopolitical shocks causing permanent capital loss for diversified, long-term investors remains remarkably poor.
Whilst equity market investors understand and accept short term volatility, the market is assessing whether this inflation shock caused by a spike in energy prices will be transitory or prolonged. The more that investors believe that this situation will lead to sustained inflation, the harsher the equity market response is likely to be.
- CENTRAL BANK IMPLICATIONS
One of the most significant developments since our initial analysis is the direct impact on monetary policy. The Reserve Bank of Australia hiked the cash rate by 25 basis points to 4.10% on 17 March, its second consecutive increase, citing inflationary pressures that had been building domestically before being compounded by the war-driven energy shock. The decision was split 5–4, and Governor Bullock warned that further tightening could follow if inflation expectations become unanchored. CBA economists now expect a further hike to 4.35% in May.
Globally, central banks face a complex policy environment. The inflation impulse from higher energy costs is inherently supply-driven, which monetary policy is poorly suited to address directly. However, with memories of the 2021-22 “transitory” inflation episode still fresh, policymakers are erring on the side of tightening to anchor expectations. This creates a challenging environment for both equities and bonds in the near term, and reinforces the importance of diversification across asset classes.
- REVISING OUR POSSIBLE OUTCOMES
In our initial analysis, we outlined four plausible scenarios. Three and a half weeks in, we can assess how reality has tracked against these:
Reality has tracked closest to our Hormuz Disruption scenario, though with emerging elements of a potential negotiated settlement as de-escalation signals increase. Even in this more severe scenario, the principle we outlined in our first analysis holds: the historical track record of geopolitical crises causing permanent investment losses for investors who stayed the course is remarkably poor.
- THE CASE FOR STAYING INVESTED REMAINS
Economic data and market movements will continue to fluctuate and at times appear unsettled, but these are point-in-time reflections; maintaining discipline, staying invested, and focusing on long-term asset allocation is what ultimately determines outcomes.
Time in the Market not Timing the Market
As always, if you have questions or concerns, please do not hesitate to contact the team at Wealth 21 on (07) 5445 3441 or advice@wealth21.com.au
Best regards
The team at Wealth 21
Published by Daniel Stojanovski (Chief Investment Officer), Callum Daly (Investment Analyst) and Thomas McLeod (Investment Analyst) — Ventura Funds Management, Asset consultant to Centrepoint Alliance on the 30th March 2026
General Advice Warning
This update is issued by Ventura Investment Management Limited (AFSL 253045), which is a related body corporate of Centrepoint Alliance Limited. The information provided is general advice only and does not take into account your financial circumstances, needs or objectives. Where you are considering the acquisition, or possible acquisition, of a particular financial product, you should obtain a Product Disclosure Statement for the relevant product before you make any investment decision. Past performance does not necessarily indicate a financial product’s future performance. It is imperative that you seek advice from a registered professional financial adviser before making any investment decisions.
Trade exposure data referenced in this paper is sourced from Allan Gray Australia, “The Risk of Maritime Chokepoint Disruption to Australian Trade” (May 2024), which utilised DFAT, UN Comtrade, and Fluent Cargo routing data.
Disclaimer: While Centrepoint Alliance Limited and its related bodies corporate try to ensure the content of this update is accurate, adequate and complete, it does not represent or warrant its accuracy, adequacy or completeness. To the extent permitted by law, Centrepoint Alliance Limited excludes any liability, including any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this update.
