There is no real surprise as to the theme of this month’s newsletter.
Recent geopolitical tension involving Iran has weighed on markets and raised plenty of questions, so I wanted to take the opportunity to share my perspective on what is happening and what investors should keep in mind.
Oil prices have jumped from around US$60 a barrel at the start of the year to over US$110 at points since the conflict escalated, largely because less oil is moving safely through the Strait of Hormuz… a narrow shipping lane that normally carries roughly 20% of the world’s oil each day and a meaningful share of global fertiliser exports. That raises questions not only about energy costs, but also about future food and farming costs if disruptions persist.
How long the conflict lasts, how intense it becomes, and how much it disrupts these trade routes will influence the size of the economic impact. It’s natural for this to feel unsettling, especially when you see headlines about markets moving 3-5% in a day like it did on Monday. In the following sections, I’ll outline what is happening, how it is affecting global and Australian markets, and why (based on history and our portfolio design), I am not concerned about the long‑term financial security.
1. The US/Israel V Iran Conflict
Since the 28th of February, the US and Israel have been carrying out airstrikes on Iran’s military and nuclear sites, in waves involving dozens of aircraft and missiles at a time. Iran has responded with missile and drone attacks on US and Israeli targets, and has used allied groups in countries such as Lebanon, Iraq and Syria to launch additional strikes. Several commercial ships have been damaged or detained near the Strait of Hormuz, and a number of airlines have rerouted or cancelled flights through parts of the Gulf and Eastern Mediterranean.
The human cost is significant. Reports indicate several thousand people have been killed across Iran, Israel, Lebanon and neighbouring areas, with many more displaced. Key infrastructure (including roads, ports, power facilities and communications) has been damaged, particularly in Iran and parts of Lebanon. Politically, both sides are seeking to gain leverage, and there is an ongoing risk the conflict could widen, although multiple countries and international organisations are engaged in diplomatic efforts to limit and eventually end the fighting.
2. Effect on Global Markets
Energy and oil: Oil prices rose sharply after the first strikes, with some benchmarks moving from the US$60 into the high US$110s per barrel. Markets are worried that even a partial or temporary blockage of the Strait of Hormuz could disrupt millions of barrels per day of oil and a substantial share of fertiliser shipments. When oil is more expensive, fuel and transport costs go up globally, which can add a percentage point or more to inflation in some economies if higher prices persist for several months.
Share markets: Global share markets reacted quickly. In the days after the conflict escalated, major indices like the S&P 500 and key European benchmarks fell around 5%, and some emerging markets in the Middle East and Asia saw larger single‑day moves. Companies that use a lot of fuel, such as airliner Qantas, has dropped by around 20% as investors priced in higher costs and route disruptions. By contrast, selected energy, defence and cybersecurity companies posted gains over similar periods as markets expected stronger demand and earnings in those sectors.
Safe haven assets: Gold has risen significantly from its levels earlier in the year, hitting fresh highs as investors sought protection against both geopolitical risk and inflation. Government bond yields in the US and other developed markets have dipped at times as money flowed into these assets, pushing prices up. The US dollar index, which measures the dollar against a basket of major currencies, has strengthened by a few percent since the conflict intensified, reflecting global demand for liquid assets.
Wider economic effects: If oil and freight prices stay elevated, they can add modestly to global inflation… for example, pushing forecasts for 2026 consumer‑price inflation up by 0.5–1.0 percentage points in some regions, and trimming global growth by a similar amount. International organisations and major banks have already downgraded global growth projections slightly, but are still expecting positive growth overall. Central banks are monitoring these developments closely as they decide what to do with interest rates, weighing the risk of stubborn inflation against signs of slower activity in areas like manufacturing, housing and consumer spending.
3. Effect on Australian Markets
Australian shares: The Australian share market (ASX) has been volatile, with daily moves of a few percent becoming common. Since the conflict escalated, energy and resource stocks have, at times, outperformed the broader index by several percentage points, supported by higher commodity prices. In contrast, some consumer‑facing sectors, property‑related stocks and financials have lagged, reflecting concerns about higher funding costs, squeezed household budgets and a potentially softer domestic growth outlook.
Resources and the dollar: Australia’s status as a major exporter of LNG, coal and metals means rising global prices in these areas can boost revenues and tax receipts. For example, some key LNG and coal benchmarks have risen 10–20% from pre‑conflict levels, and gold prices (important for several ASX‑listed miners) are also higher. At the same time, during global risk events the Australian dollar often weakens against the US dollar; we’ve seen it fall a few cents from recent highs. This tends to help exporters and companies earning US‑dollar revenues, but it makes imported goods and overseas travel more expensive for Australian households.
Households and local businesses: For households and businesses, the main channel is through prices. Higher global energy and transport costs eventually show up at the petrol pump and in the cost of goods that need to be shipped long distances. For example, if oil stays high for an extended period, that can translate into noticeably higher fuel and freight bills and a small but meaningful lift in inflation. This can put pressure on household budgets and business profit margins in the short term. The Reserve Bank and the government need to factor this in as they set interest rates, plan budgets and consider targeted cost‑of‑living support.
4. Why This Doesn’t Worry Me Long Term
From an investment point of view, this conflict is serious, but it does not change the basic principles on which our financial plans are built. Looking back over the past several decades (through oil shocks in the 1970s, the Gulf Wars, 9/11, the Global Financial Crisis and the pandemic) global share markets have experienced many periods where they fell 30% or more in response to geopolitical or economic shocks. Yet over rolling 10‑year periods, diversified portfolios have historically produced positive returns in the vast majority of cases; this is due to long‑term results being driven by economic growth, company profits and innovation, rather than by any single event.
For Australia, the impact of this particular conflict is mostly indirect and filtered through energy prices and global sentiment, rather than direct trade or financial links with the countries involved. Our economy is diverse, resource‑rich and supported by strong institutions and a flexible currency. It has come through past oil spikes, recessions and global financial crises and continued to grow over the long run. Our portfolio’s have been constructed with these realities in mind: it is spread across many countries, sectors and asset types so that no one shock can dictate your long‑term outcome. Staying invested and disciplined through these periods has historically been the most reliable way to build and preserve wealth over time.
In fact, we are using the as a buying opportunity in some cases.
The Bottom Line
It is important not to make rushed decisions in response to headlines or short-term market movements.
Periods like this can feel unsettling, but history has shown that reacting emotionally to uncertainty is often more damaging than the event itself. A well-considered financial strategy should be built to navigate periods of volatility, with the focus remaining on long-term objectives rather than short-term noise in the media.
If you would like to discuss how recent events may relate to your own situation, please feel free to get in touch.
Jack Manoni.
