There's a superstition in baseball: never talk to the pitcher during a no-hitter. You might not believe in jinxes, but you respect the ritual. In the financial markets, the equivalent superstition is: when a geopolitical conflict breaks out, your gut tells you to sell everything and run for the bunker.
And that's exactly what the herd is doing right now.
The Panic Circus
The conflict with Iran keeps escalating. The Strait of Hormuz — that chokepoint where roughly 20% of the world's oil passes through — has become the new boogeyman for LinkedIn analysts. Everyone who's never traded a single barrel of oil in their life is suddenly an expert on Middle Eastern geopolitics.
It's goddamn embarrassing.
The folks at Invesco dropped an analysis this week that, once you strip away the corporate tone you'd expect from a firm that size, has one central point worth its weight in gold: when geopolitical conflicts emerge, the first move is to take a step back and look at history.
That's not what's trending on social media. What's trending is the apocalypse.
What History Actually Shows
Let's deal in facts, not narratives.
Every major geopolitical crisis of the last 50 years — the Gulf War, 9/11, the Crimea invasion, Russia-Ukraine — followed the same market pattern: sharp drop, widespread panic, and then... recovery. Sometimes in weeks. Sometimes in months. But recovery.
The S&P 500 has historically recovered from geopolitical shocks in an average of 47 trading days. Those who sold at the bottom were left licking their wounds. Those who held — or had the stomach to buy — were rewarded.
This doesn't mean "this time is the same." It might not be. But it means you need concrete evidence of real economic deterioration before you flip the table.
And what would that evidence look like? Invesco cites three signals that would justify a change in stance:
- Credit spreads widening (companies struggling to access financing)
- Mass layoffs rising (the labor market breaking down)
- Inflation expectations surging in a sustained manner
None of the three are present right now. None.
The American economy, whether you like the current administration or not, remains in a relatively strong position according to leading indicators. The labor market is holding up. Credit is flowing. Inflation, despite pressure from oil prices, hasn't become unanchored.
The Hedge That Makes Sense (and the One That's Just Theater)
Now, maintaining a long-term perspective doesn't mean being reckless. There's a difference between panic and prudence.
If the Strait of Hormuz closes for an extended period, the impact on energy prices would be brutal. We're talking oil, natural gas, and a whole range of commodities that pass through there. If you have zero commodity exposure in your portfolio, you're walking naked through a gunfight.
The hedges that make sense in this scenario, according to the analysis:
- Oil and natural gas (via ETFs like USO, UNG, or direct exposure)
- Gold — the good old safe haven everyone trash-talks until they need it
- The U.S. dollar — which strengthens during periods of global uncertainty
- Broad commodities — diversified baskets that capture the supply shock
What doesn't make sense is selling your entire equity portfolio because a news anchor made a worried face. That's emotional theater, not risk management.
The Real Risk
You know what the biggest risk is right now? It's not Iran. It's not the Strait of Hormuz. It's not the price per barrel.
The biggest risk is making a permanent decision based on a temporary emotion.
As old Benjamin Graham used to say: the market is a voting machine in the short term and a weighing machine in the long term. In the short term, the vote is for panic. In the long term, the scale weighs fundamentals.
Nassim Taleb wrote entire books about this. The events that seem catastrophic in the moment are rarely the ones that destroy portfolios. What destroys portfolios is the reaction to those events — selling low, buying high, repeating the cycle until you're out of capital.
So before you open your brokerage app with trembling fingers, ask yourself: did the fundamentals change, or did only the headlines change?
If the answer is "just the headlines," close the app and go live your life.
Anyone with real skin in the game knows that the game is won with patience, not desperation.
