The U.S. made an announcement on the global stage that sent the media into a tizzy and financial markets into heightened downside volatility. Investors were left guessing what might come next, and how long the uncertainty would last. Was this the beginning of drawn-out tensions on the global stage? Would a recession and/or bear market follow?
I’m not describing the recent escalation in the Middle East. I’m thinking back to almost exactly one year ago, when sweeping tariff announcements triggered a sharp market selloff and a wave of pessimism about global growth. Investors likely remember how sharply the equity markets initially reacted. Global equities fell roughly -11% in a matter of days.
But the reaction didn’t last long, and we didn’t see a bear market or a recession last year. One could argue that 2025 delivered the opposite. The S&P 500 rose nearly +18% in 2025, while the U.S. economy accelerated into the third quarter, finishing the year with modest but positive GDP growth.
BEA1
What is critical for investors to remember, in my view, is that tariff headlines and trade tensions did not necessarily let up as the year went on. It would be hard to argue that we ever got ‘certainty’ on trade policy in 2025. We didn’t. But markets did not wait for trade deals to be finalized, for tariffs to be rolled back, or for uncertainty to disappear. Stocks adjusted expectations quickly and moved on.
Last year’s tariff case study underscores what I mean by ‘the cost of headline-driven decision making.’ With the current war in Iran, timing the announcement of a two-week cease-fire may have looked like a great trade on paper, but I think the smarter money would have avoided the short-term volatility altogether. As last year’s tariff episode reminds us, markets can remain very choppy in an hour-to-hour news cycle, and it’s easy for investors to get baited into changing course quickly—which can mean failing to fully participate in the longer-term recovery.
In my view, the same dynamic is at play today. Markets are once again being driven by a steady stream of headlines, only this time it’s centered on geopolitical risk, energy supply, and the Strait of Hormuz. Investors are left trying to assess not just what is happening, but how long it will last and what it means for markets.
Equities are responding in real time, but the price action is not as severe as it was last year. It’s also true that the U.S. has fared far better than international markets over the past several weeks. The U.S. is far less exposed to rising energy costs than many of its global peers, given its role as a major oil and natural gas producer. By contrast, regions like Europe remain heavily reliant on imported energy. Estimates suggest that oil and LNG imports account for roughly 1% to 2% of eurozone GDP, compared to a modest positive contribution from net energy exports in the U.S.2
This isn’t a call to favor U.S. over foreign stocks on this headline alone. It is simply a reminder that the economic consequences of a prolonged conflict are unlikely to fall evenly across regions, and that higher energy prices do not automatically translate into broad-based weakness in the U.S. economy.
If last year’s tariff episode taught investors anything, it is that markets do not wait for resolution. They adjust to the range of possible outcomes quickly, and they often move on well before the news flow improves or the uncertainty fully clears. The same may be true here. By the time this conflict feels more settled and the outlook appears clearer, markets may have already done much of their repricing. The two-week cease-fire may hold, and it may not. Investors would be better served looking further out on the horizon, in my view.
Bottom Line for Investors
The real risk in environments like this isn’t the market volatility itself. It’s how investors respond. Periods driven by macro headlines can create the illusion that action is required, whether that means buying into weakness or pulling back until uncertainty fades. But last year’s tariff episode showed how unreliable that instinct can be. The most significant market moves often occur before the news flow improves, not after.
That’s why trying to position around how geopolitical events unfold is rarely productive. It requires getting both the outcome and the timing right, which is simply not possible without a great deal of risk-taking and luck. And that is not a durable long-term investment strategy.
DISCLOSURE
2 Wall Street Journal. April 4, 2026. https://www.wsj.com/economy/the-iran-war-is-making-the-american-economy-more-dominant-than-ever-287f9569?mod=economy_feat1_global_pos2
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