Global Markets and Hard Assets: Lessons from the 2026 Iran Conflict
- James McKay
- Apr 30
- 5 min read
Updated: May 5
Geopolitical risk has a tendency to fade into the background during periods where liquidity, positioning, and macro trends dominate market narratives. Yet when it re-emerges, it does so abruptly, forcing a reassessment that cuts across asset classes in ways that are rarely uniform. The events of late February served as a sharp reminder of this dynamic.
The coordinated US and Israeli strikes targeting Iranian military infrastructure and nuclear sites, culminating in the death of Supreme Leader Ali Khamenei, marked an escalation few had meaningfully positioned for. The subsequent retaliation, stalled negotiations, and closure of the Strait of Hormuz continue to have profound implications for global markets. Despite this, it's fair to say that the fallout from these events hasn't been as spectacular as initially anticipated.
Equities, Commodities, and the Initial Shock
Although the magnitude and persistence of each move varied across asset classes,
the initial market response followed a recognisable pattern. As uncertainty peaked in early March, equities moved lower, with the S&P 500 experiencing intraday volatility and a relatively modest drawdown when set against the scale of the geopolitical escalation. At the same time, oil markets reacted with far greater intensity. Brent crude moved decisively above $100 per barrel, at points testing higher levels as concerns around physical supply disruption through Hormuz were rapidly priced in.
Figure 1: Brent crude oil price (USD per barrel), 2025–May 2026, highlighting the sharp repricing above $100 following the February–March escalation and sustained elevation amid ongoing supply disruption risks.
This divergence in sensitivity was further reflected in fixed income, where yields moved higher as the inflationary impulse from energy began to feed through expectations. Commodities more broadly echoed this move, reinforcing the role of geopolitics as a direct input into pricing rather than a secondary influence.
Divergent Behaviors and Underlying Drivers
What stood out beyond the initial shock was how markets absorbed and differentiated the events. By late April, the S&P 500 had erased its early-March drawdown and pushed to fresh highs near 7,165, despite elevated oil prices and renewed inflation concerns. The resilience of US equities, particularly within technology and energy, sits in contrast to expectations at the onset of the conflict, but we can also see a divergence across asset classes (Figure 2) which captures the differing paths taken in the weeks that followed.
For hard assets, gold experienced a classic safe-haven response in the early weeks, attracting flows and moving into the $4,500–4,700 range before partially retracing as liquidity conditions stabilized and profit-taking emerged. The yellow metal's response reaffirmed its role as a neutral reserve asset, supported by ongoing central bank accumulation that has been evident over recent years. Its initial rally and subsequent consolidation suggest a market that is responsive to uncertainty, but not reliant on it for support. Silver exhibited a more volatile profile, consistent with its dual exposure to both monetary demand and industrial activity, amplifying its sensitivity to both risk-off flows and cyclical expectations.
Figure 2: Indexed performance (base = 100) of the S&P 500, gold, silver, and Bitcoin from early March to late April 2026, illustrating divergent asset responses as equities recover to new highs while hard assets exhibit differentiated behavior.
Bitcoin’s behavior was more nuanced. The initial reaction saw it move lower alongside broader risk assets, yet this was followed by a relatively swift recovery toward the $76,000 level. Importantly, this occurred in the context of continued institutional ETF inflows, suggesting that while short-term sentiment remained a factor, underlying demand was not materially disrupted.
Most importantly, these assets did not move in lockstep with equities or each other. Correlations broke down in ways that underscored they are not interchangeable substitutes but instruments with distinct properties, portability and verifiability for digital assets, physical neutrality for gold, dual-use sensitivity for silver. In our view, the conflict exposed limitations as clearly as strengths: no single “winner” emerged, but the differentiation itself carried analytical weight.
What This Reveals About Hard Assets in the Current Regime
The 2026 episode reinforces the mechanical intersection of fiscal and geopolitical risk. Gold’s price action aligned with its function as a neutral anchor, largely insensitive to contained outcomes but responsive to tail risks and central bank reserve diversification. Its partial retrace during the equity recovery illustrated a standard sensitivity to liquidity dynamics and real yields, yet the floor remained intact, signaling a persistent underlying bid amid macro uncertainty.
These divergences do not suggest a displacement of asset roles, but rather a refinement of them. Physical and digital hard assets reflect different facets of scarcity and portability in a regime defined by overlapping fiscal constraints and geopolitical friction. In this environment instability functions as a sorting mechanism, it does not dictate a single market direction but forces clarity on asset-specific delivery when prevailing narratives are interrupted. Navigating this landscape requires a framework grounded in these observable behaviors rather than predictive speculation.
It is also worth placing the energy dynamic in a broader structural context. As shown in Figure 3, US petroleum exports have been rising steadily over recent years, but more notably have recently broken to a new high of approximately 14.2 million barrels per day. This marks not just a continuation of the trend, but a further expansion of the U.S. role as a marginal supplier in global energy markets.
Figure 3: US petroleum exports (million barrels per day), 2018–2026, showing a structural rise in exports culminating in a record ~14.2mb/d in 2026, reinforcing the growing role of the US in global energy supply.
In this context, disruptions to traditional chokepoints such as the Strait of Hormuz take on added significance, as the issue is now as much about the redistribution of the energy supply as it is about its constraining. The ability of U.S. exports to scale into periods of disruption helps explain both the speed of the initial oil price response and the persistence of elevated pricing even as broader markets stabilised. This energy surplus acts as a stabilizing force for domestic equities while simultaneously creating a higher-inflation floor that sustains the bid for hard assets.
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