Written by Cormac Nevin
Last week, the fragile truce between the US and Iran gave way to renewed conflict, and markets turned their attention back to a stretch of water barely 25 miles wide. The Strait of Hormuz, between Iran and Oman, normally carries roughly a fifth of the world’s oil. The oil price jumped, and the Bloomberg Commodity Index (a broad measure of commodity prices) returned +3.1% in hedged sterling terms, taking its gain this year to +18.0%.
For equity markets, the picture was uneven rather than universally bad. The S&P 500 Index (a measure of 500 of America’s largest companies) returned +1.0%, while markets more sensitive to imported energy costs fell, with Continental European shares down -2.5% and the MSCI Emerging Markets Index (a broad measure of shares from developing economies) down -2.1%. Bonds offered only a partial cushion, with global bonds returning -0.3%, as costlier energy revives inflation worries at a time when central banks are already vigilant.
Weeks like this can make even seasoned investors anxious. So it is often worth stepping back – a long way back. As America celebrated its 250th birthday this month, Morgan Stanley’s Andrew Sheets made a striking observation: to a global investor in the 1790s, the newly minted United States would have looked like a frontier market best avoided. Its currency had collapsed, its public finances were suspect, its politics were combustible, and its institutions were fragile. Bank failures were common, as were internal and external conflicts (and eventually a civil war). Yet… an investor who shunned the US on those grounds would have missed the greatest wealth-creation story in history. What mattered was not the absence of crises, but the young country’s ability to build credibility through them – honouring debts, enforcing contracts, and adapting. As Sheets put it, maturity is not the absence of volatility; it is the capacity to turn volatility into renewal.
The same lesson applies to geopolitical shocks today. History’s conflicts, embargoes and crises have repeatedly caused sharp but (for diversified investors) temporary market setbacks – and those who sold in the eye of the storm typically locked in losses, while those who stayed the course were rewarded. Energy-driven spikes, in particular, have tended to fade rapidly as supply adjusts.
That is also why our portfolios hold real assets and commodities alongside shares and bonds: last week, the strongest returns came precisely from the assets geopolitics disrupted. Navigating the straits does not require predicting the next headline. It requires a well-built ship and the patience to stay aboard.
All performance figures are stated in Sterling terms, unless otherwise specified.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
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All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th July 2026
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