Last week, BSW’s Investment Group was preparing to rebalance client portfolios after the MSCI ACWI had risen nearly 20% since our last rebalance in June 2025. Over the weekend, however, markets retreated sharply following major joint military strikes on Iran by the United States and Israel. The geopolitical uncertainty and market volatility that kept investors on edge throughout last year appears to have carried into 2026 with little sign of easing.
Global equity markets declined in response to the attacks, while oil prices moved higher. The military campaign has disrupted traffic through the Strait of Hormuz, a critical chokepoint through which roughly 20% of the world’s oil and liquefied natural gas supply flows[1]. Any sustained disruption raises the risk of higher energy costs, which could feed into broader inflation if increased input and transportation costs ripple through supply chains and are ultimately passed on to consumers. The magnitude and persistence of price increases will depend largely on the duration and escalation of the conflict. Goldman Sachs has estimated that in a worst-case scenario, such as a full closure of the Strait for one month, oil prices could rise by as much as $15 per barrel1.
The U.S. dollar has strengthened amid the conflict, reflecting its traditional role as a global safe-haven currency. As the world’s largest oil producer and a net energy exporter, the United States may be less vulnerable to supply disruptions than regions such as Europe and parts of Asia that rely more heavily on imported energy. This relative positioning contributed to the dollar’s strongest two-day rally in nearly a year[2].
Importantly, much of the recent rise in oil prices appears to reflect markets pricing in geopolitical risk rather than an immediate physical supply shortage. That distinction may help limit the long-term inflationary impact if the conflict proves contained. Even so, economists broadly expect the Federal Open Market Committee to hold interest rates steady at its mid-March meeting, given heightened uncertainty around energy prices, inflation expectations, and broader economic stability.
Interestingly, traditional “safe-haven” assets have not behaved as investors might expect. Gold and U.S. Treasuries declined alongside equities. Treasury yields rose (and prices fell) amid concerns about inflation and potential war-related fiscal spending, atop the already elevated federal deficit and debt levels. Gold, often viewed as both an inflation hedge and a store of value, has faced headwinds from the strengthening U.S. dollar. Notably, geopolitical tensions throughout 2025 had already pushed gold to record highs, leading some investors to question how much further the asset could appreciate in the near term.
Since the pandemic, the correlation between stocks and bonds has been higher than in prior decades, and we continue to see this dynamic during periods of market stress. When stocks and bonds move in the same direction, bonds provide less of the traditional ballast investors have historically relied upon. This environment reinforces BSW’s long-standing view that thoughtful diversification must extend beyond public stocks and bonds. BSW has consistently advocated for allocations to real assets and select private investments, which can provide differentiated return streams and potentially help moderate portfolio volatility during periods of market dislocation.
Periods like this test investor discipline. While volatility can feel unsettling, it is a normal and expected feature of long-term investing. Market shocks are unpredictable, but abandoning a well-constructed allocation in response to fear often proves more damaging than the volatility itself. We will continue to monitor developments closely and expect markets will take this event in stride. In an environment where uncertainty is elevated and correlations are shifting, patience, diversification, and process-driven decision-making are more valuable than ever.
Katherine St. Onge, Director of Investments
_________________________________________________________________________________
This blog is created and authored by BSW Wealth Partners, Inc., a Public Benefit Corporation (“BSW”) and is published and provided for informational purposes only. The opinions expressed in the blog are our opinions and should not be regarded as a description of services provided by BSW or considered investment, legal or accounting advice. Certain information sited is from third-party sources and while we believe the information to be accurate and true to the best of our knowledge, we cannot guarantee its accuracy as there may be certain unknown omissions, errors, or mistakes. Use of third-party information, including links, is in no way an endorsement by BSW. The views reflected in the blog are subject to change at any time without notice. Nothing on this blog constitutes investment advice, performance data, or any recommendation that any security, portfolio of securities, investment product or investment strategy is suitable for any specific person. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by BSW), or any non-investment related content, made reference to directly or indirectly in this blog post will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Not all BSW clients will have the same experience within their portfolio(s) and certain topics discussed in this blog may not apply to all clients or investors. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from BSW. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. BSW is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of BSW’s current written disclosure statement discussing our advisory services and fees is available upon request.
Investors should be aware that real estate investments carry significant risks including: illiquidity, concentration risk, leverage risk, interest rate sensitivity, economic cyclicality, and the potential for loss of principal. Investors should also understand that private equity investments carry substantial risks including: illiquidity, leverage risk, concentration risk, valuation uncertainty, lack of transparency, limited regulatory oversight, and the potential for total loss of invested capital. Private equity is suitable only for investors who can bear such risks and tolerate long investment horizons without access to capital. Bond investments carry risks including interest rate risk, credit risk, and the potential for loss of principal.
[1] https://www.goldmansachs.com/insights/articles/how-will-the-iran-conflict-impact-oil-prices
[2] https://www.bloomberg.com/news/articles/2026-03-03/dollar-set-for-biggest-surge-in-a-year-as-inflation-fears-mount
