Per the below, we maintain that it does not serve the overall interests of either side of the Iran conflict to resume all out war at this juncture... That said, the geopolitical experts whom we contract with are noticing that Iran seems to aggravate tensions pretty much whenever the price of oil dips below ~$70/barrel, suggesting that Iran's incentives (somewhat, if not largely political relative to the timing of the US election cycle) has them willing to push the needle to keep the stress on the US electorate elevated.
Hence, the reason for this morning's broad global selloff outlined below.
When Headlines Move Markets: A Word on This Morning's Action*
If you're checking the markets today, you're seeing red — and the reason is squarely geopolitical.
What happened: Over the past 36 hours, the fragile truce between the U.S. and Iran came under serious strain. Several commercial vessels were struck near the Strait of Hormuz — the narrow waterway that handles roughly a fifth of the world's seaborne oil — prompting U.S. retaliatory strikes, an Iranian response against American bases in the Gulf, and, this morning, the President declaring the ceasefire effectively over. Washington also revoked the arrangement that had allowed Iranian oil back onto the global market.
The market's response has followed the script we've described in these notes for months. Oil jumped more than 6% — its biggest one-day move in over a month. Longer-term interest rates pushed higher, as markets connected the dots from more expensive energy to stickier inflation. And stocks pulled back, with the average stock (the equal-weight measure we often reference) down more than the headline indexes, as the recent rotation into economically sensitive areas took the brunt of the news.
A note on gold, because it may surprise you: gold is down today, on a morning when the world got scarier. We've made this point before, and today is the cleanest illustration yet — in this cycle, gold has traded less like a fear gauge and more like an interest-rate asset. When oil spikes, inflation expectations rise, interest rates follow, and gold — which pays no interest — faces a headwind. Counterintuitive, but consistent, and it's precisely why we manage that exposure with that dynamic in mind rather than assuming gold will always rally when headlines darken.
What we're not doing is reacting. Notable volatility, and daily drawdowns notwithstanding, our core portfolio was constructed for a world where energy shocks, sticky inflation, and geopolitical flare-ups are features of the landscape, not surprises. Our exposure to energy, hard assets, and commodity-linked areas is doing its job this morning — several of those positions are green on a red day. Our hedges, which we maintain precisely for moments when stocks and headlines turn together, are contributing as well. And our deliberate diversification across regions, sectors, and asset types means no single storyline — this one included — dominates our longer-term outcome.
Some honest perspective on where this goes: our base case remains that both sides ultimately have reasons to contain this conflict rather than expand it (in dramatic fashion, that is) — that's been our view since the winter, the incentives haven't changed. But we've also never assumed the path would be smooth, and we track the situation with data, not headlines: actual shipping traffic through the strait, energy prices, and the behavior of interest rates. Those are the tells, and we watch them daily.
On the calendar: the Federal Reserve releases the minutes of its June meeting this afternoon — worth watching, since markets have recently entertained the idea that the Fed might raise rates later this year. We're skeptical of that, for reasons we've covered before, but the minutes will inform the debate. Then next Tuesday brings the June inflation report, the most consequential data point on the near-term horizon.
This note is for informational purposes and is not a solicitation to buy or sell any security. Past performance is not indicative of future results. Please contact your advisor with any questions.
*Prepared by Marty Mazorra, Chief Investment Officer, Private Wealth Advisors. Research synthesis and drafting assisted by AI tools under advisor review. All market views, analysis, and recommendations are those of the advisor.
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