The sheep are stampeding for the exits. The wolves are circling.
When the Dow Jones Industrial Average (^DJI) shed more than 700 points—roughly 1.5%—for its third consecutive shellacking, you could hear the capitulation in the trading pits. The S&P 500 (^GSPC) and Nasdaq (^IXIC) followed suit, bleeding into correction territory as algorithmic selling fed on headline risk. The culprit? Escalating conflict with Iran threatening to choke global energy supplies, sending crude oil surging decisively above $100 per barrel.
But here’s the contrarian truth I’ve learned in three decades of watching markets vomit up gains during geopolitical spasms: These are the moments that separate wealth builders from wealth watchers.
The Macro Shock
Let’s be clear about what’s driving this tape. We’re not dealing with a systemic credit crisis or a bursting tech bubble. This is a classic supply-side geopolitical shock. The Strait of Hormuz is back in the headlines, and the market is repricing energy risk with the subtlety of a sledgehammer. When Brent crude spikes above $100, every CFO in America with diesel-burning logistics chains suddenly rushes to cut guidance, and growth multiples compress faster than you can say “stagflation.”
But before you join the panic, pull up a long-term chart. I’ve seen this movie before—Gulf War I in 1991, 9/11, the Iraq invasion in 2003, Crimea in 2014, and Russia’s Ukraine escalation in 2022. In every single instance, the S&P 500 was higher six to twelve months later. The data is unambiguous: markets price in geopolitical risk quickly, then climb the wall of worry as earnings reality reasserts itself.
“Buy when there’s blood in the streets—even if it’s your own.” — Baron Rothschild (allegedly, but the wisdom holds)
The Resilience Playbook
Not all sectors are created equal in a wartime repricing. While high-multiple tech names on the Nasdaq (^IXIC) get hammered by rising real rates and risk-off sentiment, certain industries actually thrive when the bombs fly and oil spikes.
Energy: This is the no-brainer. With crude holding triple digits, integrated majors like Exxon Mobil ($XOM) and Chevron ($CVX) are printing free cash flow at levels not seen since 2008. North of the border, Canadian heavyweights Canadian Natural Resources ($CNQ.TO) and Suncor Energy ($SU.TO) are gushing loonies with every uptick in Western Canadian Select. If oil stays elevated through Q2, these names will trade at mid-single-digit PE ratios while returning massive capital via buybacks and dividends.
Defense: When geopolitical risk premiums reset higher, defense budgets follow. Lockheed Martin ($LMT), Raytheon Technologies ($RTX), and Northrop Grumman ($NOC) are suddenly trading at reasonable valuations with order books that will extend for years. The Pentagon doesn’t blink when oil prices move; they just accelerate procurement.
Utilities & Staples: For the risk-averse, this is where you hide. Boring works when volatility (^VIX) spikes above 25.
The Strategy: Surgical, Not Heroic
Am I telling you to go all-in tomorrow morning? Absolutely not. Volatility begets volatility, and we haven’t seen true capitulation yet. The VIX needs to break 30 before I’d call this a generational buying opportunity.
But for long-term investors with a three-to-five-year horizon, this is precisely when you begin deploying dry powder systematically. Dollar-cost average into broad-market ETFs like the SPDR S&P 500 ($SPY) or, for Canadian exposure, the iShares S&P/TSX 60 ($XIU.TO). Keep 20% cash in reserve for the possibility of a deeper drawdown if Iranian retaliation directly hits Saudi infrastructure.
Risk management is paramount here. Tighten your stop-losses on speculative growth names that don’t have earnings to support their valuations. Consider buying protective puts or VIX calls as portfolio insurance—cheaper now than after the next shoe drops.
The Bottom Line
The Dow (^DJI) will recover. It always does. The question is whether you’ll be a buyer of quality assets at discounted prices or the person selling $AAPL at $180 because you read a scary headline about Tehran.
History rewards the cold-blooded. Stay liquid, stay selective, and remember: wars end, but earnings are forever.