26 Mar 2026 Geopolitics Revisited

Almost exactly two years ago, I wrote about the impact of geopolitics on investing. At the time, Russia’s invasion of Ukraine was a little over two years old, Israel had suffered a terrorist attack by Hamas six months earlier, and Iran had recently launched a fusillade of drones and missiles at Israel. Now, turmoil in the Middle East is once again roiling markets as rising oil prices worry investors and Fed officials alike. While the overall impact on stocks and bonds has thus far been minor, a prolonged war with Iran would have a significant economic impact for one major reason: oil.

In today’s economy, there’s no more important number than how much a barrel of it costs. Since the bombing began on February 28th, oil prices have increased approximately 40% and the S&P 500 index has fallen by 5% (as of Thursday, March 26th). The longer oil remains elevated, the greater the impact on both stocks and the economy. JP Morgan says: A sustained oil price as high as $90 per barrel would likely catalyze a 10%–15% decline in the S&P 500. As the price rises towards and beyond, say, $120 per barrel, the selling in the S&P 500 will intensify. Again, the stock market is currently down 5% from the recent top as oil prices hover around $90.

Oil is important because of the many knock-on effects: High prices can cause inflation, which can slow spending, which can impact economic growth, which can make stocks less attractive in the short-term, which can impact consumer confidence, which can impact spending, and on and on.

An apt comparison to the current situation is July, 1990, when Iraq invaded Kuwait. From July to October, oil prices went from $17 to $36 and stocks fell more than 13%. Thankfully, the disruption was short-lived: Four months later, stocks had fully recovered and oil was trading close to $20. In that engagement, the U.S. operation lasted six weeks, a couple weeks longer than the current war. Messaging from the White House is that they desire to end the war soon, which could allow crude to once again pass safely through the Strait of Hormuz.

I shared this chart in my brief from two years ago and it’s worth revisiting:

I also made the following observations:

1. The impact of any geopolitical event varies;
2. The time-frame leading up to the event can actually be tougher on stocks than the days and months following the event;
3. Most events have a limited impact;
4. The impact is typically short-lived.

That being said, what’s currently taking place can cause us to worry about our finances. While I fully acknowledge that data isn’t the best salve for worry, allow me to share the following chart:

What you’re looking at is the January, 2019-March, 2026 growth of three portfolios that closely resemble our models: Beacon 50, which puts 50% into stocks and 50% into bonds, is in blue, Beacon 60, which allocates 60% to stocks and 40% to bonds, is in green, and Beacon 80, which invest 80% in stocks and the remainder in bonds. The growth of all three portfolios is respectable–the latter two portfolios saw the initial investment more than double, while the former got close–but that’s not really the the point. To get there, let’s look at the same chart with a bit more context:

Over the last 6+ years, we’ve experienced three significant stock market disruptions: The Pandemic, which caused stocks to fall by 34% in five weeks, high inflation/Fed rate hikes in 2022, which gave us the worst calendar year in history for 10-year treasuries and the worst performance for a balanced portfolio since the Great Depression, and the Tariff shock of 2025. Despite all this, the S&P 500 averaged more than 18% a year.

I showed clients a chart similar to the first one a few weeks ago as we were reviewing their performance. As we looked it over, I pointed out the three time frames that are highlighted in the second chart as a way of saying: Yes, the end result is good and it may seem like it was an easy ride. But remember: there were really hard times, too. The Pandemic was–for many reasons–incredibly challenging. The year-long freefall that occurred in 2022 was grueling. The rapid fallout from the tariff announcement was unsettling. I’m not saying we are entering one of those times now, I’m just reminding you that we’ve been uncomfortable before, we will be again, and the key is to not overreact. As investors, we have to be comfortable sitting with the tension of: Yes, investing involves risk, yes, my portfolio will lose value from time-to-time, and, if I can keep my cool and remain invested over long periods of time, I will do well.

But, as I said, data isn’t nearly the balm that a good conversation is. So if you’re in need of one of those, we hope you’ll reach out to us.

The content above is for informational and educational purposes only. Past performance does not guarantee future performance. The links and graphs are being provided as a convenience; they do not constitute an endorsement or an approval by Beacon Wealthcare, nor does Beacon guarantee the accuracy of the information.