Every geopolitical conflict follows the same market pattern; how should we strategize for the US-Iran conflict?

Source: Felix Prehn, Investment Analyst; Translated by: Jinse Finance

News about the US and Iran is everywhere these days.

If you're wondering if you can actually make money from this conflict—the answer is: yes. I'll tell you the specific methods.

I worked as an investment banker for many years, specializing in finding what Wall Street calls cold, hard "event-driven opportunities"—their euphemism for war.

I used to be an investment banker, specializing in finding what Wall Street calls cold, hard "event-driven opportunities"—their euphemism for war.

I worked for many years looking for cold, hard "event-driven opportunities."

I worked for many years looking for cold, hard "event-driven opportunities"—their euphemism for war.

I worked for many years as an investment banker, specializing in finding cold, hard "event-driven opportunities."

Market Patterns That Repeat Every War

• 10 days before a geopolitical conflict: S&P 500 falls 5%–7%

• Approximately 35 days later: Returns to flat

• 12 months later: Rises 8%–10%, roughly the same as the average increase in a normal year

Historical Examples:

• During the Gulf War: S&P annualized return 11.7%; surged 18% in the year after the war ended

• 2003 Iraq War: Market rose 13.6% within 3 months

• 2022 Russia-Ukraine Conflict: S&P initially fell 7%, rebounded within a few months and surpassed pre-war levels

Wars rarely destroy markets.

War creates panic, panic creates a downturn, and a downturn creates opportunity. Why Iran is particularly important. Iran produces 3.3 million barrels of oil per day. Any escalation—even just anticipated—will trigger supply risks and spread to all sectors. Markets don't wait for actual supply disruptions; they price in the risk in advance: traders assume some oil production may stop → supply decreases, demand stabilizes → oil prices rise. And oil is the cost of almost everything: transportation, manufacturing, shipping, food, fertilizer, heating and cooling systems.

• Rising oil prices → Increased costs across the board

• Rising costs → Higher inflation

• Higher inflation → The Federal Reserve may maintain high interest rates and not cut them

• Higher interest rates → More expensive mortgages, car loans, and business loans

• More expensive borrowing → Decreased corporate profits

• Decreased profits → Lower stock valuations

This is a complete transmission chain.

Three stages that all conflicts go through

Which stage you are in determines what you should do.

Stage 1: The Shock Phase

Rapid, intense, driven by emotions and algorithms.

Oil prices surge. The VIX fear index soars. High-growth technology, biotechnology, and speculative stocks plummet. Funds flow into safe-haven assets: gold rises. Media bombards the market 24/7, amplifying fear. This phase lasts several days to one or two weeks. Buying oil, gold, and military stocks at this time almost certainly means buying at the peak. The most emotional moments are precisely when you're most likely to lose money. Second phase: Repricing period. Panic subsides, and the market begins to think, not feel. The question changes from "What happened?" to "What will happen next?" Is the impact temporary or structural? Will inflation remain high? What will the Fed do? Will the supply chain be permanently disrupted or only temporarily strained? Institutions are starting to position themselves here. Not in the first few chaotic days, but in the period of clarity after the chaos. Smart money makes money in the calm after the storm, not in the storm. The third stage: the period of capital rotation. Funds withdraw from the impacted sectors and rotate to sectors that benefit from the new environment. This is the real direction for making money. Where will the money really flow? 1) Energy sector – but not the kind you think. The most obvious example is oil, which has indeed outperformed in the short term. Bank of America data from 1990 shows that under geopolitical shocks, oil prices rose by an average of 18%. But even more stable are: Pipeline companies, storage terminals, energy infrastructure—they can "collect tolls" regardless of oil price fluctuations. 2) Defense and military industry—focus on the long term, not short-term news. Military stocks may surge immediately, but military spending isn't a quarterly event. The government signs 10-year procurement contracts, leaving giants with hundreds of billions in backlog orders. The key is: companies that can benefit from multi-year military spending cycles. 3) Gold and silver—strongest long-term logic. Gold surged in the first phase, but unlike oil, it tends to maintain high levels. Bank of America data shows that six months after the shock, gold continued to outperform by an average of 19%. The logic is solid: High inflation, central bank money printing, institutional risk aversion. As long as the conflict continues, oil prices remain high, inflation is stubborn, and the Fed cannot cut interest rates, gold is the most comfortable asset. 4) Companies with pricing power – the trump card most people overlook. If inflation remains high for a long time, you should hold: Companies that can pass on costs to customers, companies that don't lose customers, companies with strong brands and high profit margins, and companies whose customers have no cheap alternatives. If you don't know which companies are high-quality, we have developed a tool specifically for this purpose.

• Go to BetterStocks

• Click "High Quality" and you'll see all the companies that meet your criteria—so you're filtering based on truly important numbers.

Which Sectors Will Get Hurt

Utilities and real estate sectors typically underperform during these periods. Persistently high interest rates will compress valuations in these two sectors. If you have an overweight position in these sectors, it's worth reassessing your investment allocation.

What You Should Really Do Now

• Don't panic sell. Decades of data prove: Selling during a shock = locking in losses and missing the rebound.

• Don't chase stocks that have already skyrocketed; once they're on the headlines, it's too late.

• Watch Less War Broadcasts

Keep your core holdings intact—hold high-quality, strong-brand, high-margin companies with pricing power.

Then ask yourself two questions: Which of my assets are most vulnerable? Where is the money flowing, and I haven't allocated it yet? Make appropriate adjustments and keep up with the direction of institutions. This concerns your livelihood, retirement, and family financial security. Good risk management will lead to profits. This is the least provocative statement, but the most truthful.