Day 5 of the conflict

As the Iran conflict moves into its fifth day, markets are staying in defensive mode. In a nutshell: oil is up, the dollar and gold are up, and equity markets outside the US are feeling the selling pressure. The German DAX, for example, is down ~6% over the last three days, while the S&P 500 (in USD) is down ~1.3%.

While Mr. Market acts as an emotional voting machine in the short run, our base-case assumption remains that this conflict will not derail the global economy via an oil shock comparable to the Yom Kippur war. That said, the short-term pain is real, with oil and gas prices moving sharply higher. Iran’s ability to sustain a prolonged war effort—logistically and operationally—without air sovereignty looks limited given the forces deployed by the US and its allies in the Gulf. Still, this will likely take longer, and prove more costly, than the US administration wants to believe.

Our portfolios remain solidly in place. We keep our eyes open for new opportunities—because when fear takes over, good companies often get marked down alongside everything else.