By Gwendoline Tan
If you’ve only got a minute:
- While geopolitical events can create market uncertainty, it is crucial for investors to remain invested and diversified.
- Instead of timing when to enter the market, employ a dollar-cost averaging strategy and invest regularly.
- Keep a long-term view, investing on broad, long-term secular themes rather than market fluctuations.
We are living in unprecedented times.
Ongoing tensions in Ukraine and across parts of Asia continue to reshape global energy and food markets. Meanwhile questions surrounding US tariffs, government policies, and independence of the US Federal Reserve remain.
2026 began with political upheaval in Venezuela upon the capture of President Nicolás Maduro and renewed tensions over Greenland. Most recently, US and Israel unilaterally started a war on Iran with an eye on regime change.
These are all a sobering reminder on just how quickly and unpredictably the global landscape can shift. Yet, this is no reason for investors to start panicking.
Amidst the political tensions, it helps to take a broader perspective: staying focused on the importance of investing with a long-term view and maintaining a diversified portfolio.
Key focus points in the US-Iran war
The escalating tensions between US, Israel and Iran have drawn particular attention from financial markets, with investors closely watching the oil sector and its ripple effects on the rest of the world.
The Strait of Hormuz and oil prices
In early March 2026, global oil prices skyrocketed in the wake of oil supply disruption, breaching US$100/barrel – a first since the Russia-Ukraine war in 2022.
This is because Iran is a major oil producer, contributing to around 3% of the global oil output, making it the 4th largest producer in OPEC (Organisation of the Petroleum Exporting Countries).
Of greater concern, Iran has effectively closed the Strait of Hormuz, warning that vessels entering the strait would face attack. This is unprecedented, even during the Iran-Iraq war in the 1980s, despite attacks on oil tankers passing through.
The Strait of Hormuz is a narrow channel (approximately 33km at its narrowest point) between Iran and Oman. It is one of the most strategically significant shipping routes in the world, with approximately 25-30% of global oil trade passing through it.
A prolonged closure will cause huge disruption to the global oil trade given that even the spare oil capacity from Gulf producers has to pass through this strait.
Inflation and interest rates
Though known to be one of the chief culprits of pollution, crude oil remains key in many aspects of our daily life. This includes fuel for transportation like cars, ships and planes, manufacturing of plastics, and even agricultural processes like the production of fertiliser.
The effect of an increase in oil prices thus spreads beyond energy markets and translates to an overall increase in prices of goods and services. Think, not just your petrol, but also your food, toys, computers and more.
This in turn leads to heightened inflation which unfortunately comes at a time when consumers are already facing an affordability crisis. High levels of debt in developed economies are also limiting the measures which governments can take to support growth at this point.
Typically, in managing rising inflation due to high demand, rising production costs and excessive money supply, the US Federal reserve turns to hiking interest rates. This time however, inflation is being fuelled by a shortage oil supply and not typical economic activity. As such, the likelihood of the US Fed raising interest rates to manage this is low, since doing so will not help the supply issue. This narrative may change if oil prices remain high for long or continue to climb.
Global impact
Over multiple conflicts through the years, the world has evolved significantly, learning to manage energy consumption and risks of supply chain disruption. That said, areas with limited or no alternative energy sources are still expected to be heavily impacted.
The soaring energy prices so far have taken a greater toll on Europe and Asia, as compared to the US. The resilience of the US owes to their domestic energy production making them self-sufficient as a net energy exporter.
Asia on the other hand, has a high level of industrialisation and dependence on oil imports. Countries such as Japan, Korea, China, Taiwan, India and Singapore, are net oil importers and will be impacted in differing degrees depending on how heavily they rely on oil from the Middle East.
Even though the war started out between US-Israel and Iran, other regions within the Middle East are also taking heat, seeing aerial attacks, airbase strikes, and widespread disruption to shipping and airspace.
Impact on investment assets
In times of geopolitical instability, investors shift to a more cautious, risk-off mode, as they assess the potential impact of unfolding events. This means retreating from risky, more volatile assets like stocks, to safe-haven assets like fixed-income assets or gold.
Equities
When oil prices surge, economic growth and consequently, the equity markets, are negatively impacted. The severity of this is largely dependent on the duration of the oil price disruption.
Historically, geopolitical shocks seldom lead to sustained volatility for equities as markets begin to recover once uncertainty begins to ease. Investors should stay focused on long-term secular themes and not short-term movements.
On a broad level, the defence and energy sectors are likely to benefit from circular growth spending (higher spending allocated to strengthen defence in times of war) and increased prices respectively. Meanwhile healthcare, being a defensive non-cyclical industry, is likely to be less affected.
Fixed income (bonds)
Bonds are often viewed as relatively safer assets because they tend to be less volatile than equities.
However, the impact on the bond market in the current environment is hard to gauge. Higher energy prices may add to inflationary pressures, while weaker economic growth caused by supply disruptions could have the opposite effect. These opposing forces create uncertainty around the direction of interest rate movements and bond prices.
In such an environment, maintaining exposure to quality, investment grade bonds (rated BBB and above) can provide income generation while reducing portfolio volatility.
Read more: 8 things to know before buying bonds
Find out more about: DBS CIO Liquid+ Fund
Gold
It is no secret that gold is a shelter from volatility and a hedge against geopolitical risk and US dollar uncertainties.
The flight to safety has already begun as investors flock to gold. We also see continued and increased central bank buying. With investor demand rising and current political tensions, the price of gold is likely to remain strong moving forward despite potential minor price corrections.
Read more: Investing in gold
Find out more about: Thematic investing with CIO Insights Funds
What should investors do?
Everything hinges on events that have yet to unfold. With each passing day, we see the conflict and its impact taking a slightly different shape.
Given that we all have myriad questions, and no magic crystal ball to predict the future, what can investors do?
The answer is to stay invested and well diversified. Sitting on cash over extended periods will still result in a gradual erosion of purchasing power.
Employing a dollar-cost averaging (DCA) approach allows you invest smaller amounts of money into the same investment at regular intervals. This helps you to remove the stress of having to time the market, smoothen overall portfolio volatility, and remain disciplined by investing over the long run.
Read more: Is lump-sum investing or DCA better for you?
Find out more about: Invest-Saver
CIO Insights Funds
To help simplify your decision-making process, investment experts at DBS have curated an essential list of funds called CIO Insights Funds. This includes index funds as well as ready-made discretionary portfolio solutions like digiPortfolio to provide even broader diversification.
Find out more about: Investing with CIO Insights Funds
Barbell strategy
DBS Chief Investment Office (CIO) reiterates adopting a barbell strategy, which strikes a balance by combining exposure to growth equities on one end, and income assets on the other.
The efficacy of this strategy has been demonstrated through the CIO’s Barbell Portfolio, incepted in August 2019. Since then, it has weathered 3 major storms (Covid-19, the 2022 financial market meltdowns, and “liberation day”) and still delivered annualised year-to-date returns of more than 8% (as at 2 March 2026).
Read more: What is the Barbell Strategy?
Final considerations
In any war, nobody truly emerges a victor. However, in the wise words of renowned scientist Albert Einstein, “In the middle of difficulty lies opportunity”.
While markets continue to react and shift, the core principles of investing remain unchanged: stay disciplined and focused on the long-term goals. Periods of uncertainty are part and parcel of investing, and they often remind us not only of the importance of diversification, but also of perspective.
Beyond searching for opportunities in building our portfolios, these moments can also be opportunities to show kindness and support relief efforts where possible. It is also a precious reminder to cherish the people and moments that truly matter in our daily lives.
