An end to a war that everyone has to win

It’s difficult to end an armed conflict when all the victorious sides have to sell out. That’s the situation with the Iran-Contra conflict.

The war in Iran has become a negotiation between the United States and Iran . Iran views the conflict as a matter of survival and seeks guarantees that it will not face future attacks from the United States and Israel. Following the 12-day-war of the summer of 2025 , Iran has prepared for a protracted conflict by decentralizing its command structure and considering the closure of the Strait of Hormuz essential for establishing a credible deterrent.

And this, despite the global economy’s reduced dependence on oil— renewables had to contribute to some improvement—has helped to moderate the market’s reaction to the war. Not surprisingly, the final impact will be asymmetric : the economies most dependent on imported energy—China, Europe, India, and Japan—face considerably greater disruptions than the United States, which has achieved a high degree of energy self-sufficiency.

Although there is no clear path to détente, it seems that all this posturing could lead to an agreement in the short term, which would limit the damage to the global economy, already partially reflected in some business confidence indices. Iran prefers to project that it is winning the war despite the partial destruction of its energy and weapons infrastructure and the elimination of its top commanders (replaced by a new crop of even more radical leaders).

For now, limited damage to the markets

In this context, there are increasing signs that time is running out for both sides. Markets are moving exclusively based on day-to-day events, with rising energy prices as a backdrop, which could trigger a shift in central bank monetary policy, making it more restrictive. This explains why the reaction in the stock markets has so far been much more subdued than in the fixed-income markets.

In short, at the moment the markets are moving based on President Trump’s comments on social media and the media in general, which is not exactly reassuring and, at the same time, requires us to be especially careful with portfolio movements.

What is truly decisive in the short term

The key to how events unfold will be the reopening of the Strait of Hormuz , and markets will react optimistically to any signs that the passage is opening. This is possible, as the title of this column suggests, even if all parties must emerge as winners, which will curb this period of uncertainty and the volatility currently affecting the markets.

Nevertheless, geopolitical tensions are likely to remain high, raising the question of how investors can position their portfolios in a world characterized by increased trade and economic uncertainty. The solution to this dilemma is what I’ve been discussing in this column over the past few weeks : staying invested tends to beat market timing , and, moreover, well-diversified 60/40 portfolios outperform cash across various time horizons, even after challenging periods.