Weekly Buzz - Crude awakening: Markets react to the Iran-Israel conflict 🌍

5 minute read

The conflict between Israel and Iran has brought with it another round of volatility, but history suggests that geopolitical shocks often follow a pattern: initial panic, then recovery.

What’s going on?

The biggest impact is showing up in Iran’s largest export: oil, which has plummeted from a weekly average of 1.7 million barrels per day to just 102,000. Brent crude oil prices have also jumped 7% to over US$74 a barrel. The market remains focused on the Strait of Hormuz – that narrow waterway through which roughly one-fifth of the world's oil flows.

Research from Deutsche Bank shows that the S&P 500 has historically pulled back about 6% in the three weeks following a major geopolitical shock, then recovers those losses within another three weeks.

Why does this pattern emerge? Initially, uncertainty begets volatility – but as the immediate shock wears off and businesses continue operating, rational assessment takes over. The global economy will keep functioning – especially if the event remains confined to one region.

While there’s no way of knowing whether this conflict will escalate further – or turn out milder – the data speaks to the market's ability to separate short-term disruption from long-term fundamentals.

What's the takeaway?

Markets are ultimately forward-looking machines. Once investors can assess actual economic impact rather than imagining the worst-case scenario, prices begin reflecting business fundamentals instead of fear-driven speculation.. Geopolitical shocks can feel apocalyptic in the moment, yet markets have weathered the Cuban Missile Crisis, multiple Middle East wars, and countless other crises while maintaining long-term growth trajectories.

Recent volatility reinforces why diversification remains a cornerstone investing principle. The first half of 2025 has seen significant turbulence, with defensive assets like gold demonstrating their value as portfolio stabilisers. While predicting how conflicts unfold is near impossible, constructing portfolios strategically allocated across regions and asset classes provides meaningful protection against geopolitical shocks.

(Looking for a portfolio that does the strategic asset allocation for you? Check out General Investing.)

💡 Investors’ Corner: How China turned pressure into advantage

Trade tensions between the US and China continue to simmer, with tariffs creating genuine challenges for businesses on both sides. But the data suggests Chinese companies are doing more than just weathering the storm – they're using it as fuel for innovation.

Take semiconductors: despite being cut off from US chips, SMIC became the world's third-largest foundry in 2024. Chinese automakers have also made dramatic advances, with EVs capturing 51.1% of China's domestic car sales for the first time in 2024 – exceeding traditional vehicles.

Meanwhile, Beijing approved 302 AI service models for public use by January 2025 – nearly triple the 117 approved just ten months ago. These aren’t just research models – they’re commercial applications like content generators and business software that companies can actually deploy.

China's trade dependence on the US has also decreased significantly since the first round of Trump-era tariffs – down to its lowest level in four decades at just 10% of total trade.

The story of China’s resilience matters for investors. While trade tensions can create volatility, Chinese companies are demonstrating exactly the kind of adaptability that creates long-term value.

(Whether you’re looking for broad access to China, targeted exposure to the country's tech sector, or a diversified Asian strategy, our Flexible Portfolios let you fine-tune your exposure.)

This article was written in collaboration with Finimize.

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