Investment strategies to overcome this crisis
Somewhat incongruously, of the investment assets that typically offer protection during crises, only the dollar is currently generating returns. Gold and sovereign bonds are not.
Somewhat inconsistently, of the investment assets that typically offer protection during crises, only the dollar is currently generating returns (for those of us who think in euros). Gold and sovereign bonds are not performing as well.
Where are we now, an energy crisis? Sinking markets?
It’s premature to talk about an energy crisis: although gas and oil prices have risen sharply, they are still far from the levels reached when the Russia-Ukraine conflict began, and for now, electricity and gasoline prices in Europe have remained stable and do not reflect these increases. We’ll see what happens later.
The main stock and bond markets in the West, despite extremely high volatility, are managing to stay slightly below their levels at the beginning of the year, suggesting that investors continue to see the US and European economies as fundamentally sound, with recession risks still very limited in 2026. This is also an indicator of the underlying persistence of positive investor sentiment , as investors continue to tend to buy on sharp declines.
What to do with wallets if the crisis persists
If we enter a prolonged period of armed conflict without seeing any real alternatives for its end soon, is it advisable to consider strategies to protect portfolios?
High levels of geopolitical risk are historically difficult to manage in both equities and fixed income:
- As for the stock markets, the «flight to quality» and the value management style should be intensified further ( a point I have been emphasizing for months ), putting aside the highest growth stocks (technology) and other sectors such as non-discretionary consumption (luxury) and tourism (airlines will continue to be penalized) which are the most volatile parts of the market at times like the present.
- Fixed income has not proven to be an effective safe haven during this crisis, especially government debt, which is priced in higher levels of inflation , causing its prices to fall. Combining short-term floating-rate bonds in case short-term interest rates rise, and taking advantage of yield curve upswings to accumulate fixed income with durations of 2 to 4 years, are good strategies. Very active management of these investments is now essential, and there are investment funds that offer this service.
Gold hedging
As a JPMorgan report reminded us a few days ago, gold doesn’t always act as a safe haven, nor is it «a reliable substitute for higher-quality fixed income.» Its performance in high-inflation environments has been inconsistent historically. Nevertheless, it continues to offer valuable diversification advantages in a context of high geopolitical and inflationary risk, such as the one we could face, which could negatively impact equity and fixed-income prices. Therefore, it is reasonable to continue including it in portfolios, either directly (ETFs and ETCs) or indirectly (multi-asset investment funds with a significant weighting in precious metals).
The only historically safe strategy
Seeking refuge in liquidity is rarely the appropriate response to geopolitical events, as JP Morgan also reminded us in another report and illustrated with this chart comparing the return of a mixed portfolio (60% stocks and 40% bonds) with that of the money market:
Percentage of excess total return vs. liquidity after shocks
Source: Bloomberg, S&P Global, JP Morgan Asset Management. The 60/40 portfolio is constructed using the S&P 500 Index and the S&P 10-Year US Treasury Note Futures Index. Cash: ICE USD LIBOR (3M). Return calculation begins at the close of the month prior to the shock. Data as of February 28, 2026.
In short, a balanced portfolio of equities and bonds has outperformed cash by an average of 9% over a one-year time horizon, and by an average of 22% over a three-year horizon. Even when these events have significant repercussions for the economic outlook, investors should bear in mind that markets respond not only to the geopolitical shock itself, but also to the expectation of the monetary and/or fiscal support that often follows.
The end of the conflict
The key question now is whether we’re heading for a conflict lasting a few weeks or a few months. In any case, the central scenario we foresee should affect inflation (modest impact) and growth in the major advanced economies.
Whether the war drags on or not will be determined by the theoretical achievement of the ultimate objectives. Regime change seems unlikely, but the elimination of Iran’s weapons arsenal could precipitate a negotiated end.
Therefore, beyond tactical maneuvers, it’s worth reflecting on the need to maintain the calm I discussed in this column a week ago and on how to position ourselves once Iranian military power has been neutralized, because this war will end then. As I explained above, the historical lesson of what happens at the end of a major war is compelling. Hence, patience and coherence—financially speaking, of course—are the guidelines to follow.
P.S. For Trump supporters: I think that when the US president says there is a «greater good» to defend in the Iranian conflict, he’s only telling part of the truth. The relevant factors in this war are far from limited to the laudable defense of the civilian population against the tyranny of the ayatollahs; there’s much more: from Jewish lobbies in the US to MAGA’s propaganda in the lead-up to the midterm elections next November. However, this could backfire on him if very negative events occur for the American military.