(This article was first published in The West Australian, YourMoney, on 30 March 2026)
It’s hard to turn on the news at the moment without seeing headlines about the escalating US–Iran conflict.
Oil prices are moving higher, markets have the jitters and commentators are quick to use words like “crisis” and “emergency”.
And while that may all be true in the short term, history tells us something far more useful – markets have seen this all before.
Geopolitical shocks are not unusual events. They are a recurring feature of investing. Wars, conflicts and global tensions have played out many times over, and yet over the long run, markets have continued to move forward.
That doesn’t mean there’s no impact. There is. But it’s the type of impact, and more importantly the duration, that matters most.
The first reaction is almost always wrong
When events like the current conflict unfold, markets tend to react quickly. Oil prices spike, equity markets become volatile and investors shift toward perceived safe havens.
We are seeing exactly that play out now, particularly in energy markets given the importance of the Strait of Hormuz as a key artery for global oil supply.
However, the initial market reaction is often a poor guide to what happens next. What matters far more is how the situation evolves in the weeks and months that follow.
More often than not, markets recover
Looking back over decades of data, one thing stands out clearly – markets are remarkably resilient.
Across major geopolitical shocks over the past 80 years, markets have typically recovered swiftly. In fact, around two-thirds of the time they are higher one year after the event, often recovering faster than expected.
It’s an important reminder, particularly when uncertainty is high and it is tempting to believe that “this time is different”.
More often than not, it isn’t.
So, what does matter?
What matters more is whether a geopolitical shock evolves into a broader economic one.
If conflict begins to disrupt oil supply in a sustained way, second-order effects can emerge – higher inflation, tighter financial conditions and slower growth. We are already seeing early signs of this, with rising oil prices influencing expectations around interest rates and bond markets adjusting accordingly.
That is when markets begin to pay closer attention – not just to the event itself, but to its economic consequences.
When don’t markets bounce back quickly?
History also provides useful context for the occasions where markets did not recover quickly. In each case, there were deeper structural issues already in play.
Events such as Pearl Harbor during World War II, the 1973 oil crisis or the 9/11 attacks all occurred alongside broader economic weakness.
The common thread is clear – the geopolitical shock was not the sole cause of market stress, but a catalyst layered on top of an already fragile system.
That is a very different backdrop to what we typically see today.
So what should investors do?
Rather than reacting to headlines, the focus should remain on maintaining an appropriate portfolio structure. For more conservative investors, that means ensuring the right defensive exposures are in place. For balanced portfolios, it is about maintaining diversification. And for growth-oriented investors, periods of volatility can often present opportunity.
Where investors tend to come unstuck is not in staying invested, but in trying to step out and re-enter at the “right” time.
It is an understandable instinct. When markets fall and uncertainty rises, the idea of moving to the sidelines and waiting for clarity feels sensible.
The challenge is that markets do not recover in a neat or predictable way.
On the Australian market, some of the strongest rebound days have occurred right at the depths of uncertainty. During the COVID-19 sell-off, the ASX 200 delivered gains of around 6 to 7 per cent in single trading sessions, with several sharp moves occurring within a very short period.
These were not moments when the outlook felt comfortable. They were moments when uncertainty was still at its peak.
Missing even a small number of those rebound days can have a lasting impact.
Take a $500,000 balanced portfolio compounding at 8 per cent over the long term. If it remains fully invested, it could grow to just over $1.07 million over a decade.
However, if an investor sells down and misses those early stages of the recovery, the portfolio does not simply does not catch up when they re-enter the market.
Even if markets go on to deliver the same long-term return, that return is now being earned on a smaller base of capital.
Over time, that difference compounds.
The result can be a gap of more than $150,000 over 10 years – not because markets failed to recover, but because the investor was not invested when the recovery began.
Those who stayed the course benefitted. Those who tried to time the market and re-enter when “things felt better” often paid a significant long-term price.
The bottom line
The US–Iran conflict is serious and it will create volatility. It may also influence inflation, interest rates and energy markets in the months ahead.
But markets have a long history of working through geopolitical shocks and refocusing on the fundamentals that ultimately drive returns.
The greater risk for investors is not the event itself, but the decisions made in response to it.
Periods like this are where discipline matters most. Staying invested, remaining diversified and avoiding reactive decisions can have a far greater impact on long-term outcomes than any single geopolitical event.
This is where good advice plays an important role. The right counsel helps investors maintain perspective, filter out the noise and avoid decisions that may feel justified in the moment but have lasting negative consequences.
Because in investing, long-term success is often less about reacting to events and more about avoiding the mistakes that derail compounding over time.
Raymond Pecotic is the Managing Director of Empire Financial Group.
