By Steve Garmhausen
As the war in the Middle East rages on, stocks have sold off, oil prices have jumped, gold has surrendered the gains it made since the conflict began, and Treasuries are caught between safe--haven demand and inflation fears. Should U.S. investors derisk their portfolios? Buy energy stocks? Or should they sit tight and ride out the volatility? For this week's Barron's Advisor Big Q, we asked advisors what they're telling their clients right now.
Stuart Katz, chief investment officer, Robertson Stephens: There is a long history, unfortunately, of horrible geopolitical events; markets have historically demonstrated resilience in the face of those dislocations. It's important to make sure you have a plan in regard to what you own and why you own it, and to be thoughtfully diversified. We wouldn't make major shifts in portfolios at this juncture because of the headlines.
It is our view that the Trump administration has followed a precedent set by its tariff policies of escalate and then de-escalate. We think that framework is more likely than not to apply in regard to this Middle East conflict, especially in the context of midterm elections coming up. We're asking clients to lean on history. If you go back many decades and tease out major geopolitical events, the markets on average have had peak-to-trough declines of maybe 5% to 10%, but 12 months after those trigger events, the markets have generally been in positive territory.
We're watching the VIX [the Cboe Volatility Index]. Long-term levels have been in the high teens, and recently they have pushed above 20. We believe that a VIX in the 20-to-30 range is demonstrating more persistent fear, though not capitulation. If the VIX should move north of 30, it could be an interesting moment for rebalancing portfolios, or for those with extra cash to deploy into risk assets, with the understanding that you need to know why it's pushing to that level.
Anshul Sharma, chief investment officer, Savvy Wealth: The recent escalation in the Middle East and the resulting volatility in energy markets naturally triggers a flight-to-safety response. Our objective is to distinguish between a temporary headline shock and a fundamental shift in the long-term economic landscape.
Historically, geopolitical shocks create sharp, short-term market dislocations, but rarely do they meaningfully alter long-term earnings trajectories. While the spike in energy prices is a significant volatility shock, we believe the global economy currently displays more structural resilience than during previous conflicts. To us, it is more productive to monitor secondary effects than initial headlines. This includes the potential for sustained energy-driven inflation that could delay potential Fed easing and shift the broader market narrative.
High-tension environments are precisely why portfolios are constructed with multi-asset diversification. Equity, fixed income, and commodity allocations often respond to geopolitical stress in offsetting ways. If this structural defense is already in place, we believe making large-scale portfolio changes in response to the recent escalation would be reactionary. Instead, this is the moment when disciplined construction proves its value.
Jacob Taurel, managing partner, Activest Wealth Management: If there is one variable with the most potential to move markets, it is oil, and I find scenario thinking most useful here. A swift resolution reopens the Strait of Hormuz, brings Iranian supply back online under a new framework, and reinforces U.S. energy dominance, keeping oil prices low and giving the Fed unexpected flexibility on inflation. A prolonged conflict with sustained Gulf disruptions keeps oil higher, in the $80 to $100 range, complicating the narrative of disinflation. A tail risk escalation targeting Gulf energy infrastructure could push oil beyond $100, triggering an inflation surge that forces the Fed to halt rate cuts and put meaningful pressure on growth and consumer spending simultaneously.
The optimistic scenario appears most likely. Removing a destabilizing regime should enhance global stability and investor confidence. Global markets should benefit if this scenario plays out over the medium and long term. Defense and energy sectors could benefit in the near term from ongoing geopolitical risk and volatile energy prices, making these areas worth re-evaluating for tactical investors. Successful investors will be those who remain disciplined and ready to act when others hesitate; this mind-set offers a clear advantage now.
Matthew Smart, director of financial planning and portfolio analysis, WWM Investments: When geopolitical events dominate the headlines, the most important message we give clients is that markets have navigated conflicts before. While the situation involving Iran is serious from a geopolitical perspective, investors should remember that financial markets tend to react first with volatility and then quickly begin focusing again on economic fundamentals.
The most immediate market impact tends to come through energy prices. Iran sits in a region that is central to global oil supply and shipping routes, so any escalation can push oil prices higher and temporarily add inflationary pressure to the global economy. That can create short-term market swings, particularly in sectors sensitive to energy costs or inflation expectations. Energy markets often act as the transmission mechanism between geopolitical tension and financial markets. Even small disruptions or perceived risks to supply routes can move oil and shipping prices quickly, which then flows through to inflation expectations, interest rates, and broader equity markets. This is why geopolitical developments in the Middle East tend to show up first in commodities and currency markets before fully impacting equities.
However, history shows that geopolitical shocks rarely alter long-term investment outcomes. Most conflicts create short bursts of volatility rather than lasting damage to diversified portfolios. Markets tend to digest geopolitical news relatively quickly as investors assess the actual economic impact versus the initial headline risk. For investors, the key is discipline. Trying to reposition portfolios based on headlines is often counterproductive. Instead, we focus on maintaining diversified allocations and ensuring portfolios are built to withstand periods of uncertainty.
Write to advisor.editors@barrons.com
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March 04, 2026 12:55 ET (17:55 GMT)
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