March 10, 2026:
We occasionally write about the perils of investing based on newsworthy events. Our reasoning is that if you’re reading about it in the news, it’s already priced into markets, so you can only “win” if you know something the consensus doesn’t.
This view is especially well supported for geopolitical conflicts, where the investor instinct to run to safety has usually been costly. The below chart from BCA Research shows that conflicts have been a buying opportunity more often than not:
This is not just a US stock phenomenon. As the table below shows, average stock returns throughout the world have been comfortably positive after major military events of the past four decades:
This time could be different, but that’s ok
With that said, this particular conflict stands a higher than usual chance of causing economic pain. Iran is effectively blocking passage through the Strait of Hormuz, a major oil shipping lane, and oil prices have surged as a result. Over the weekend, Brent crude spiked as high as $120/barrel, up from $73 before the bombing began. It’s since dropped back to $89, but that’s still 22% higher than it was ten days ago. The longer oil prices remain elevated and volatile, the greater the risk of harm to the global economy.
But we don’t see this as a reason to run for the hills. Economic downturns are always a possibility — one reason stocks carry a return premium over safer assets in the first place. Timing around that risk is unreliable, as the above images make clear, and the opportunity cost of being wrong can be very high. We’d rather be guided by multi-year expected returns and accept that the occasional setback comes with the territory.
So while we aren’t naive about the economic risks here, we don’t think panicking is the right move. Nothing much has changed about the long-term potential for growth in global economic activity and corporate earnings, and that’s what we’re buying into. (For a refresher and a chart on this idea, see this article we wrote during last year’s tariff panic).
Seeking safety in value
Part of the reason we’re comfortable staying invested is that we’ve focused on reasonably valued parts of the market.
The Iran situation has drawn comparisons to the 1973 oil embargo — a scary parallel, because the decade of the 1970s was famously bad for US stocks. Less well known is the fact that international stocks and US value stocks both significantly outperformed the overall US market that decade. This is in large part because they generally began the decade at lower valuations, which made them more resilient when the bad news hit.1
We see another parallel to the 1970s in relative valuations today. The overall US market is again quite expensive compared to both US value and international stocks. We certainly hope economic conditions prove better than they did in the 1970s. But if they don’t, we’re glad to be focused on investments that aren’t priced for perfection.
- International stocks and US value stocks outperformed US growth by 7%/year and 9%/year, respectively, during the 1970s. They traded at between a 30%-50% discount to the overall US market at the start of the decade. (Sources: Institute of Business and Finance; Robert Shiller; Dimson, Marsh, and Staunton).