Global Conflict and Your Investments
General
| March 4, 2026
What Investors Need to Know
Recent developments in the Middle East have understandably raised concerns for investors. The United States and Israel have launched significant military action against Iran, triggering retaliation across the region and disrupting a critical global energy supply route known as the Strait of Hormuz.
While the situation is serious and evolving, history shows that markets have faced, and recovered from, similar geopolitical shocks many times before. Below, we explain what’s happening, how it could affect markets and Australia, and what this means for your investment strategy.
What’s Happening (In Simple Terms)
The conflict has escalated following long‑running tensions over Iran’s nuclear and military activities. The strikes have damaged key Iranian infrastructure and leadership, leading to retaliatory action across the Middle East.
One of the most significant consequences so far is the effective closure of the Strait of Hormuz, a narrow but vital shipping route through which around 20% of the world’s oil and 25% of global liquefied natural gas (LNG) normally flows.
When supply routes like this are disrupted, global markets react quickly – particularly energy markets.
How Global Markets Typically Respond
Oil and Energy Prices
Oil prices tend to rise sharply during Middle East conflicts, especially when supply is disrupted. If elevated prices persist, they can flow through to transport, manufacturing, food production and household costs.
Share Markets
Share markets often react negatively in the short term to geopolitical uncertainty. This initial volatility is largely driven by fear and uncertainty rather than long‑term fundamentals. Historically, markets tend to stabilise and recover once the situation becomes clearer.
Inflation and Interest Rates
Higher oil prices can add to inflation, but central banks, including the Reserve Bank of Australia, usually try to “look through” short‑term supply shocks. This means that interest rate decisions are not automatically changed due to geopolitical events alone.
Defensive and “Safe Haven” Assets
During periods of uncertainty, assets such as government bonds and gold often perform more strongly. Certain energy‑related investments may also benefit from higher commodity prices.
What This Means for Australia
For Australian households, the most noticeable impact is likely to be higher petrol prices.
As a rule of thumb, every US$1 increase in the oil price adds around one cent per litre to Australian petrol prices. A sustained rise could add meaningfully to weekly household expenses and place pressure on consumer spending.
That said, Australia is relatively well‑positioned compared to many countries:
- Australia is a net exporter of energy
- Higher coal and gas prices may partially offset negative impacts
- Our economy is less oil‑dependent than many global peers
This means the overall economic impact on Australia may be more balanced than in other parts of the world.
What History Teaches Investors
Geopolitical events are unsettling, but they are not new. Markets have previously navigated wars, energy crises, pandemics and financial shocks – and continued to grow over time.
Key lessons for investors include:
Volatility is Normal
Market pullbacks are a normal part of investing and are the “price” paid for higher long‑term returns.
Market Timing rarely works
Trying to jump in and out of markets during uncertain periods often leads to poorer outcomes. Missing just a handful of the best recovery days can significantly reduce long‑term returns.
Selling after a fall “locks in” losses
Markets typically recover, and they often do so when sentiment is at its worst.
Market downturns can create opportunities
For long‑term investors, periods of weakness can provide opportunities to invest in quality assets at more attractive prices.
Diversification Matters
Well‑diversified portfolios across asset classes, regions and sectors are designed to be more resilient during periods of uncertainty.
Staying Focused on What Matters Most
While news headlines can be unsettling, the fundamentals that drive long‑term investment outcomes – innovation, productivity, corporate earnings and economic growth remain intact.
At Profusion Planning, our focus is on helping clients:
- Stay disciplined during volatile periods
- Make decisions aligned with long‑term goals, not short‑term noise
- Ensure portfolios are built to withstand a range of possible outcomes
If you have concerns about how current events may affect your investments, or if you’d like reassurance that your strategy remains appropriate, we encourage you to speak with your adviser.
Contact Us
We can help you review your finances, budget and repayments and get you sorted with the best loan for your circumstances so you are set for success in a competitive market. Contact us today.
Address: 333 Pier Street, Perth WA 6000
Postal Address: PO Box 8445 Perth BC WA 6849
Phone: (08) 9316 3050
