Markets have begun to digest the initial shocks, but longer-term unknows could still spark volatility
By the afternoon on Monday, the first full trading day since the United States and Israel launched a series of airstrikes against Iran, killing the country’s Supreme Leader, US markets had traded effectively flat. The S&P 500, and the Dow Jones, began the day down but saw rallies as investors bought the dip. The S&P/TSX composite actually gained on Monday as disruption to crude oil and natural gas supplies caused by this conflict buoyed Canadian energy names. With the first trading day of this conflict behind us, though, advisors are left with questions to answer for their clients.
Chief among those questions will be the duration and the scale of this conflict. US President Donald Trump said on Monday that he expects the conflict to last about four weeks, but uncertainties persist should this conflict spiral. While that question remains hard to answer, advisors need to look at how markets and economies may be reshaped in the medium and longer-term.
“As macro investors, our thesis always has been that the assets will likely bounce back when the war ends,” says Tyler Mordy, CEO & CIO at Forstrong Global Asset Management. “These events typically follow a pattern of buy the rumours, sell the news. When you get geopolitical threats, they increase uncertainty and downside risks, but when they event happens they resolve uncertainty, prompt policy responses, and that creates the recovery.”
Mordy is also looking closely at first-order impacts from this conflict, which is notable in contrast to the conflict with Iran in June of 2025 as Iran seems more willing to attack targets in member states of the Gulf Cooperation Council (GCC), notably Saudi Arabia, Bahrain, Qatar, and the United Arab Emirates (UAE). GCC equities were down on Monday, and Mordy highlights impacts to Emirati stocks given the UAE’s relative lack of exposure to oil prices and greater exposure to banking, finance, and real estate.
The energy market impacts of this conflict are also significant, given Iran’s strategic location over the Strait of Hormuz, through which about 20 per cent of global oil and LNG flow. The retaliatory strikes on GCC states, too, have disrupted production and sent both oil and natural gas prices much higher. The extent of that impact, however, will come down to how long this conflict drags on for.
“The main watch point, from our perspective at Russell Investments, is really going to be on the oil price,” says BeiChen Lin, Director and Head of Canadian Investment Strategy at Russell Investments. “Because right now we have a situation where crude oil, even after the increase on Monday, March 2nd, is still hovering only around $70 a barrel for WTI. By our estimates, generally speaking, you would need to see a sustained oil price increase north of $100 a barrel or so in order to have a pronounced effect on the US and global economy.”
The global growth story, especially in the United States, remains intact from Lin’s perspective. He notes that fundamentals in the world’s largest economy remain relatively strong and corporate profits are rising. While those tailwinds should remain in place, Lin does see the potential for more short-term volatility in the weeks and months ahead. He stresses the importance of discipline and long-term thinking in these moments.
There is a risk that this conflict goes on for longer than the US President would like, or becomes a longer commitment should Iranian attacks on GCC states necessitate further escalation on the part of the United States. Mordy notes the example of the Russia-Ukraine conflict, however, to highlight the ways in which global supply chains eventually adjust. Gulf oil and LNG is too important for this to derail their supply entirely. Nevertheless, volatility remains.
Mordy also notes that a shift in global power towards multi-polarity creates a likelihood of greater geopolitical volatility for investors to navigate. The question for many now is where they can find safe havens. Traditionally that would be in US bonds or the US dollar, but those have shown more weakness lately. Commodities, he says, may provide that ballast. Mordy sees the world in a new commodities super-cycle as the ‘real economy’ resurges. AI, the reshoring of manufacturing, and increased defense spending all support commodities, which can also diversify from increasingly correlated bonds and equities. He also sees shorter-term upside globally in oil producing countries outside of the Middle East, notably in Canada, Latin America, and East Asian oil producers like Malaysia.
While advisors may seek advantages and opportunities here, the fact remains that long-term outcomes are still very much unknown. While Lin notes that short-term spikes should not derail any long-term investment theses, he stresses the important role advisors have to play in keeping investors from making rash decisions.
“Stress the importance of staying calm, even when it does seem like the world is getting a little bit more chaotic,” Lin says. “Because at the end of the day, research has shown that investors who do take that longer term perspective stand to benefit. And when you do see pockets of market volatility, that's when we would think if there is a potential opportunity to be had, rather than thinking about, this as the time to panic.”
