How to Play Iran - February 20, 2026
A Long-Term Investment Framework for an Iranian Conflict
An Iranian conflict represents a profound geopolitical dislocation, yet for the prudent steward of capital operating on a three to five-year horizon, it is paramount to distinguish the initial cacophony of breaking news from the underlying economic realities. The natural human inclination during military escalation is a flight to liquidity. However, a rigorous examination of historical precedents and contemporary geopolitical analysis reveals that such shocks often create compelling opportunities for those who remain steadfastly rational. Rule 1. Build a cash reserve in advance.
The Historical Precedent of Conflict and Capital
When contemplating the specter of war, we must first look to the past. Historical market behavior during military conflicts since the Second World War—including the 1990 Gulf War and the 2003 invasion of Iraq—demonstrates a remarkably consistent pattern. Markets typically experience a sharp initial equity decline and a surge in the US dollar, driven by risk aversion, followed by a swift recovery as investors gain clarity. Indeed, historical data indicates that short-term volatility is common at the onset of geopolitical crises, but total drawdowns are often minimal, with average recoveries achieved in a matter of weeks. Unless a conflict structurally damages consumer demand, corporate earnings, or triggers a severe global recession, the initial uncertainty ultimately fades, allowing markets to price in fundamental economic realities once more. Rule 2. Do not sell in the face of panic.
Energy Markets and the Strait of Hormuz
The most visceral impact of an Iranian conflict would undoubtedly be felt in global energy markets. The Wall Street Journal recently highlighted Iran's military preparations, noting the deployment of naval units to the Strait of Hormuz in anticipation of potential strikes. A disruption in this vital maritime chokepoint would instigate an immediate risk premium on crude oil.
Yet, as Forbes recently articulated, risk in this arena is a cascade of Bayesian probabilities rather than a binary outcome. While an embargo or regional hostilities could tighten oil markets notably for weeks or months, Iran's diminished role in the contemporary global oil supply means that disruptions are more likely to establish a floor on prices rather than sending them soaring permanently. Even in a severe scenario akin to the 1979 revolution, where production recovery could take years, the broader market would re-equilibrate as other OPEC nations adjust output. Therefore, the strategic investor should not merely chase spot prices but rather allocate capital to domestic North American energy infrastructure and production, which stand to benefit from a sustained premium on reliable supply. Rule 3. Invest in North American Oil Infrastructure.
The Strategic Diversion and Defense Allocations
Beyond energy, one must consider the broader strategic implications of a Middle Eastern entanglement. Foreign Affairs magazine astutely observed that a protracted conflict with Iran could serve to overextend the United States, inadvertently aiding strategic rivals such as China by diverting resources and focus. The publication advocates that true strategic power lies in preserving domestic industrial capacity and fiscal stability, rather than embarking on foreign crusades.
This macroeconomic view underscores the necessity of a robust defense and cybersecurity allocation. A modern conflict with Iran would inherently involve asymmetrical cyber warfare, targeting critical infrastructure and financial networks. Furthermore, The Economist has noted the delicate diplomatic maneuvering and contingency planning currently occupying Gulf powers such as Saudi Arabia and the United Arab Emirates, reflecting the broader regional instability that a conflict would precipitate. Consequently, established defense contractors and enterprise cybersecurity firms transition from discretionary holdings into essential defensive assets within a long-term portfolio. Rule 4. Create a defense and cybersecurity allocation.
The Psychological Discipline of the Long View
Perhaps the most crucial element of navigating such a crisis is psychological fortitude. Financial markets in the region, such as the Iranian rial, have already demonstrated extreme fragility in response to escalating tensions and shifting US military postures. Global markets may initially mirror this apprehension. However, the ultimate strategy is to refrain entirely from capitulatory selling. By maintaining a fortress balance sheet of cash and high-quality fixed income to weather the initial storm, the sophisticated investor is liberated to utilize inevitable market pullbacks as a generational opportunity to acquire superb equities at discounted valuations. Rule 5. Create a buy list with specific price levels.
Geopolitical crises do not alter the fundamental principles of wealth creation; they merely test our adherence to them. By anchoring a portfolio in domestic energy, defense, and cybersecurity, whilst maintaining a disciplined three to five-year perspective, one can construct a framework robust enough to withstand the tremors of an Iranian conflict and emerge exceptionally well-positioned for the subsequent economic reality.
Fears Israel-Iran conflict will derail the global economy
Executive Summary: Navigating an Iranian Conflict
Historical Resilience: Initial market volatility and equity drawdowns following geopolitical shocks are historically fleeting. Within a three to five-year investment horizon, global markets consistently re-equilibrate, making capitulatory selling a mathematically detrimental endeavor.
Strategic Energy Allocations: While a disruption in the Strait of Hormuz would precipitate an immediate risk premium on crude oil, the prudent, long-term allocation is directed toward North American energy infrastructure and production, which stand to benefit immensely from a sustained premium on reliable domestic supply.
The Defense and Cyber Imperative: A modern Middle Eastern entanglement will inevitably feature asymmetrical cyber warfare and a profound reallocation of global military resources. Consequently, established defense contractors and enterprise cybersecurity firms must transition from discretionary holdings to essential defensive anchors within the portfolio.
Capital Preservation and Deployment: Maintaining a fortress balance sheet, underpinned by cash and high-quality fixed income, provides the vital liquidity required to weather initial market tremors. This psychological discipline liberates the investor to utilize subsequent market pullbacks as a generational opportunity to acquire superb equities at deeply discounted valuations.
