General advice warning:
The information in this update is of a general advice nature only and has been prepared without taking into account your personal objectives, financial situation or needs. Because of that, you should, before acting on the advice, consider the appropriateness of the advice, having regard to those things. Past performance is not a reliable indicator of future performance and should not be relied upon.
March Show – Retirement Living Your way
Geopolitical implications on investment portfolio’s
This Time it is different?
Top 10 Geopolitical Shocks That Moved Markets
- Russia invades Ukraine (2022) One of the most significant geopolitical shocks in decades. Energy, grain and fertiliser prices surged. Europe faced a major energy crisis and inflation globally accelerated.
- US–China Trade War (2018–2020) Tariffs imposed on hundreds of billions of dollars of goods disrupted global supply chains, increased market volatility and weighed on global growth expectations.
- Hamas attacks Israel and Gaza war (2023) Triggered risk-off sentiment, increased Middle East tensions and pushed oil prices higher amid concerns about regional escalation.
- Saudi Aramco oil facility attacks (2019) Drone strikes temporarily removed about 5 percent of global oil supply. Oil prices jumped sharply in the immediate aftermath.
- US withdrawal from Afghanistan (2021) The rapid Taliban takeover increased geopolitical uncertainty and highlighted limits of Western intervention.
- Brexit completion and UK–EU trade shift (2020–2021) The UK’s exit from the European Union altered trade arrangements and created prolonged currency and equity market volatility.
- Sanctions escalation against Russia (2022 onward) Financial system disruptions, commodity price shocks and the freezing of Russian central bank reserves had significant implications for global capital flows.
- China regulatory crackdown on technology sector (2021) Heavy regulation on Chinese technology, education and property sectors wiped hundreds of billions from market capitalisation.
- Red Sea shipping disruptions (2023–2024) Houthi attacks on shipping forced rerouting of major trade routes, raising freight costs and supply chain concerns.
- US–China strategic rivalry and semiconductor restrictions (2022–present) Export controls on advanced chips and technology reshaped supply chains and global technology investment.
Key Observation
Markets tend to react most strongly when geopolitical events affect energy supply, global trade routes, sanctions regimes or major economies.
Each time it is different.
It is interesting to consider, what if we stayed invested through all of these events? What would it have looked like?
This is a free website (https://www.vanguard.com.au/corporate) that Vanguard has some great educational tools where you can look at returns over different time periods. We ran the chart from April 2010 through to January 2026.
You can see from the results that “yes” markets do pullback in a crises as you would expect.
What else do you notice though? They recovered.
During events like this, what were some of your options? You could have considered any of the following:
- Panic, sell then wait for markets to recover and then buy back in;
- Make sure you are in good assets and sit tight;
- Sell off some to allow you to feel comfortable to allow markets time to recover; or
- Buy some more while it was down.
There is no precise rule for market behaviour during wars and geopolitical events, however history provides a useful guide. Equity markets typically fall modestly at the outset of a major conflict, then recover once the uncertainty begins to clear.
Average Share market Pullback During Major Wars
- Average initial market decline: about 10 percent to 15 percent;
- Typical time to trough: 3 to 6 weeks after the conflict begins;
- Average recovery period: markets often recover within 3 to 6 months.
Historical Examples
- Russia’s invasion of Ukraine: Global equities fell roughly 12–15 percent from peak to trough during the early months of the conflict.
- Gulf War: US equities fell around 17 percent in the months leading into the war but rebounded strongly once the conflict commenced.
- Iraq War: Markets had already declined in advance. Once military action began, equities actually rallied.
- September 11 attacks: The S&P 500 fell roughly 12 percent in the immediate aftermath.
Key Market Pattern
- Markets price in geopolitical risk before wars begin;
- Once conflict actually starts, uncertainty declines and markets often stabilise;
- Longer-term market direction is usually determined more by interest rates, inflation and economic growth than the war itself.
For long-term investors, major geopolitical shocks have historically produced short-term volatility rather than lasting market damage. Markets have generally recovered once the economic outlook becomes clearer.
Who are Iran’s Friends?
Let’s look specifically at Iran given the nature of what is occurring there at present.
Iran’s closest international relationships are shaped by shared strategic interests, regional security dynamics and opposition to US influence.
Russia is one of Iran’s most significant partners. The relationship has strengthened in recent years through defence cooperation, energy coordination and alignment on regional issues such as Syria.
Economic ties have expanded under Western sanctions affecting both countries.
China is Iran’s largest trading partner and an important diplomatic counterweight to Western pressure. The two countries signed a long-term strategic cooperation agreement covering energy, infrastructure and investment. China provides economic engagement that helps offset sanctions constraints.
In the Middle East, Syria is a longstanding ally. Iran has provided military and financial support to the Syrian government during its civil conflict, viewing Syria as central to its regional security posture.
Iran also maintains close ties with non-state actors, including Hezbollah in Lebanon and Hamas in Gaza. These relationships form part of what Iran describes as the “axis of resistance” against Israel and US influence.
Regionally, Iran has pragmatic relationships with neighbours such as Iraq, where it holds significant political and economic influence.
Overall, Iran’s closest partners tend to be countries or groups that share strategic interests, economic necessity, or opposition to Western dominance in regional affairs.
Who are their trading Partners?
Iran’s trade relationships are shaped by sanctions, energy exports and regional geopolitics. Despite restrictions from the United States and parts of Europe, Iran maintains meaningful trade flows with several key partners.
China is Iran’s largest trading partner. It is the primary buyer of Iranian crude oil, often through indirect channels due to sanctions. China also exports machinery, electronics, vehicles and consumer goods to Iran. The relationship has deepened under a long-term strategic cooperation agreement signed in 2021, covering energy, infrastructure and investment.
Iraq is a major regional partner. Iran exports electricity, natural gas, food products, construction materials and manufactured goods to Iraq. Religious tourism and cross-border trade also contribute materially to economic ties.
United Arab Emirates plays a critical intermediary role. While not a large end-consumer of Iranian goods, the UAE, particularly Dubai, acts as a re-export hub for goods moving into Iran, including electronics and machinery.
Turkey is another significant partner, trading in natural gas, gold, agricultural products and manufactured goods. The two countries maintain substantial overland trade routes.
India has historically been an important oil customer, though purchases reduced significantly after tighter US sanctions. India remains involved in infrastructure cooperation, notably the development of Iran’s Chabahar Port, which supports regional trade access to Afghanistan and Central Asia.
Russia has expanded economic cooperation with Iran in recent years, particularly in energy, defence and transport corridors, including the International North-South Transport Corridor linking Russia to the Indian Ocean.
Overall, Iran’s trade is concentrated in energy exports and regional commerce, with China the dominant partner and neighbouring countries forming the core of non-oil trade flows.
Out of interest we thought we’d look at who are Venezuela’s trading partners?
Venezuela’s trade relationships have shifted significantly over the past decade due to sanctions, declining oil production and geopolitical realignment. Its trading partners are now concentrated among a smaller group of countries.
China is one of Venezuela’s most important partners. China has been a major buyer of Venezuelan crude oil and has previously provided substantial loans backed by oil shipments. It also exports machinery, electronics and manufactured goods to Venezuela.
United States has historically been a key oil customer. While US sanctions sharply reduced trade flows after 2019, limited oil exports have resumed under temporary licence arrangements, making the US again a relevant destination for Venezuelan crude.
India has been a significant buyer of Venezuelan oil, particularly heavy crude suited to its refineries, although volumes fluctuate depending on sanctions settings.
Spain and other European countries maintain more limited trade ties, largely in energy and refined products.
Regionally, Brazil and Colombia are important neighbours for cross-border trade in food, manufactured goods and energy products, particularly following the normalisation of diplomatic relations with Colombia.
Russia and Iran are also notable partners, providing fuel, technical support and economic cooperation in response to Western sanctions.
Overall, Venezuela’s trade remains heavily oil-dependent, with China, the US and India central to export flows, while regional neighbours and strategic allies support broader economic activity.
What investment fundamental choices do we have?
Being a Market Timer – Trying to Time the Market
Market timing is the strategy of attempting to predict future market movements in order to decide when to invest, when to sell, and when to reenter the market. The objective is simple: buy before markets rise and sell before they fall.
In theory, market timing sounds logical. In practice, it is extremely difficult to execute successfully and consistently.
What Market Timing Requires
- When to get out of the market before a downturn;
- When to get back in after the downturn;
- How much to invest at each point and in which company?
- Do this repeatedly, often under emotional pressure.
Missing any one of these steps can significantly reduce longterm returns.
Why Timing the Market Is So Hard
Markets are forwardlooking and move before news is fully known or understood. As previously mentioned, by the time geopolitical risks, recessions or crises are widely discussed, markets have often already priced in much of the bad news.
Key challenges include:
- Unpredictable timing
Market bottoms and recoveries are only obvious in hindsight. The strongest rebounds often occur when investor sentiment is still very negative. - Sharp recovery days
A small number of strong market days account for a large portion of longterm returns. Being out of the market during these periods can materially reduce outcomes. -
Emotional decisionmaking
Fear during downturns and overconfidence during rallies often lead investors to sell low and buy back higher. - False signals
Markets frequently experience shortterm rallies during longer declines and shortterm pullbacks during longterm uptrends, making signals unreliable.
The Cost of Getting It Wrong
Common outcomes include:
- Selling after markets have already fallen;
- Waiting too long to reinvest because conditions still feel uncertain;
- Reentering only after markets have already recovered
Even sitting in cash for relatively short periods can significantly impact longterm compounding, particularly for retirement investors relying on growth over time.
Market Timing During Geopolitical Events
- Initial market declines are usually shortlived;
- Markets often stabilise or recover once conflict begins, not when it ends;
- Longterm returns are typically driven more by interest rates, inflation and earnings growth than by the conflict itself.
Historically, investors who attempted to move in and out during wars and geopolitical shocks faced a high risk of being out of the market during recovery phases.
Who Does Market Timing Tend to Suit?
- Professional traders with strict risk controls;
- Institutions with access to realtime data and execution;
- Investors with shortterm objectives and high-risk tolerance.
For most longterm investors — particularly those in or approaching retirement — market timing increases complexity and behavioural risk without reliably improving outcomes.
An Alternative Perspective
Rather than trying to predict shortterm market movements, many investors focus on:
- Have a structured approach to investing. Consider is the use of SAA (strategic Asset Allocations) or TAA (Tactical Allocations) appropriate for you;;
- Asset allocation aligned to their goals and risk tolerance;
- Diversification across asset classes and regions;
- Regular review and rebalancing;
- What is your research side on size scale for triggers to buy or sell?
- Maintaining discipline through periods of volatility.
History shows that staying invested through uncertainty, while uncomfortable at times, has generally been rewarded over the long term.
Key Takeaway
Market timing requires being right twice — when you exit and when you reenter — and doing so consistently over many years. While appealing in theory, it has proven to be one of the most difficult strategies to execute successfully, particularly during periods of heightened geopolitical uncertainty.
