Middle East Uncertainty Demands Skill and Fortitude

Global financial markets seem to be taking the situation in Iran about as expected. While initial moves in the various major stock market indexes were muted, volatility is increasing as it appears the conflict has the capacity to persist. Iran is a huge country from both geographic and population perspectives, and it is difficult to anticipate how the war may progress over time.

Investor concerns over the circumstances in the Middle East seem largely focused on crude oil and natural gas prices, and for good reason. While the importance of oil to the global economy has declined in recent decades, the commodity is still the most important input to the global economy. Oil is also a major input in plastic and even food production. In addition, natural gas is vital to economic activity, as it is used prolifically to power industrial production and heat homes.

Despite the vital importance of these energy commodities, roughly half to two-thirds of oil and a third of natural gas involves sourcing and supply chains which cross international borders, and 20% of the supply of both flows out of the Persian Gulf region, right through the conflict zone. A major military conflict in this region has the potential to disrupt not only production but transport of oil and natural gas.

$100 crude oil is a psychological barrier often used by economists and investors to anticipate increased global recessionary risks, and for pretty good reason. Sharp increases in oil prices preceded recessions in 1974, 1980, 1990, and 2008. On the consumer level, it is generally accepted that for every $10 movement in crude oil prices, gasoline prices in the U.S. move about $0.25. When gasoline prices spike and remain high, the increased prices can end up acting as a hidden tax, resulting in lower consumer spending in other categories which ultimately has the capacity to impact business profits and stock prices.

How individual investors choose to respond to the increased financial market volatility related to conflict-impacted energy prices should depend on individual goals and time horizons. I believe financial market conditions in 2026 were already pre-disposed to more active rebalancing activity, which means taking profits on a more consistent basis and reweighting investments between asset classes more frequently. For those with a longer-term time horizon or a higher capacity to endure volatility, the increased market instability may offer some opportunities to pick up positions in stocks that may have been missed in the current bull market cycle. Investment decisions in general are going to require fortitude and skill while the situation in the Middle East remains fluid.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing includes risks, including fluctuating prices and loss of principal. No investment strategy can guarantee a profit or preserve against loss. Past performance is not a guarantee of future results. Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.

Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at marc.ruiz@oakpartners.com. Securities offered through LPL Financial, member FINRA/SIPC.