Four Weeks into a Man-Made Disaster. What It Means for Your Portfolio
Oil choked, dollar surging, yields dangerous — history says stay in, but brace for more pain.
Four full weeks into an active geopolitical conflict in the Middle East, and the markets have delivered their verdict: this is not a drill. The only honest summary we can offer is that this is a rather man-made disaster.
Equity markets have swung from denial to near capitulation. The favourite trades of 2026 have reversed sharply. Back in mid-February, there were casual conversations around the fact that all the consensus trades this year - emerging markets, commodities - rested on a single driver: dollar weakness. The logic was airtight. From fiscal dynamics to monetary policy, from institutional flows to positioning data, everything pointed the same way. The dollar was going to weaken. The only debate was by how much.
And yet, here we are. A month later. Taking educated guesses on how far the dollar can strengthen.
That is the most exciting thing about markets. What seems most obvious often turns out to be anything but. As students of this craft, we bow, once again.
If you are navigating intelligent conversations with morning walkers, gym buddies, or that startup-founder friend, here is how we are answering the questions that matter most right now.
1. Where Does Oil Go?
The first set of ships that departed before hostilities began have now reached far-off destinations like South Korea. Of the roughly 20 million barrels per day that move through the Strait of Hormuz, about 7 million can be rerouted. The remaining 13 million cannot.
Alternate routes exist. The Cape of Good Hope, for instance. But if the normal route takes 19 days, the Cape adds 16 days for European destinations and 22 days for Japan. The distance nearly doubles. Most vessels are already rerouting, given the scale of the emergency.
Transit costs tell the story plainly: from USD 125,000 per voyage to over USD 2 million.
Oil and gas remain acutely dependent on the Strait of Hormuz reopening. Alternate routes will stabilise over time, as they always do. At sufficiently elevated price levels (above USD 130 per barrel), demand destruction historically acts as a natural ceiling for oil. On the downside, current cost structures and producer behaviour suggest meaningful support exists well above recent cycle lows, i.e. around USD 80.
Likely long-term implications:
Countries will build Strategic Petroleum Reserves far more aggressively.
The push toward renewables and energy alternatives is likely to become a strategic national priority, not just a climate one.
2. Where Does the Dollar Go?
In a continued risk-off environment, the dollar strengthens. Cash is king when uncertainty is high, and most global asset managers entered 2026 at record-low cash levels. That is now reversing; and reversing fast.
Dollar strength is not good news for emerging markets or commodities outside of oil.
However, if the dollar strengthens far enough to destabilise markets broadly, the Federal Reserve may be compelled to act. At that point, the dollar would reverse. There is also a tail-risk scenario: if the United States is perceived to be losing ground in this conflict, a “Sell America” narrative could intensify and weigh on the dollar over the longer term.
Our base case is a rising dollar in the near term, with the trajectory ultimately dependent on how far the Fed is willing to let markets deteriorate before stepping in.
3. What Happens to Equities?
Most markets, including India, now appear to be flashing oversold.
For context: during the 2022 selloff, the NASDAQ 100 PE bottomed at 20.5x. It already touched 21.5x last Friday.
There is another signal worth watching. Implied correlations have spiked sharply. In plain terms, this means everything is being sold together, indiscriminately. As one market research firm noted, correlation spikes have historically coincided with market bottoms. Things are bad, but we may be getting closer to the floor.
Geopolitical events have a track record of being clearing events for valuations. The next generation of market leaders is typically born in exactly this kind of environment.
Calling the precise bottom is always hard. But the weight of evidence suggests we are approaching one. Either that, or a prolonged bear market. Current earnings and demand fundamentals do not support the deeper bear case. Some combination of policy action or a Fed backstop should eventually calm nerves.
4. What Happens to Precious Metals?
Gold and silver have had their dance.
At current elevated levels, the risk-reward for fresh positions has narrowed considerably. We remain constructive on gold and silver for the long term. Dollar strength, policy uncertainty, and rising US Treasury yields create a challenging backdrop for precious metals in the near term.
5. US Yields: The Biggest Problem in the Room
Global yields are rising. The driver is straightforward: higher oil prices are pushing up inflationary expectations.
Fiscal policy needs to act to curb energy prices and ensure access. Many countries have already done this. But the United States has a particular problem. It cannot afford persistently high yields. US 10-year Treasury yields above 5% would be genuinely dangerous for global markets. Something, whether a policy pivot or a market intervention, has to come first.
6. Emerging Markets: Where Next?
Emerging markets command a risk premium in normal times and tend to do well in easy liquidity environments. Right now, neither condition applies.
EMs also carry high energy import dependency and are exposed to currency weakness as the dollar strengthens. They are not the winners in the current environment.
Brazil stands out as relatively insulated. But broadly, we view the pain in EMs as transient. Earnings remain strong and valuations are among the most attractive they have been in years.
The Bottom Line
The conflict shows little sign of a near-term resolution. But investor behaviour has, on balance, been more prudent than panic-driven.
More pain in risk assets is likely before conditions improve. But abandoning equities at this stage seems like the wrong call. History suggests that geopolitical dislocations, painful as they are, have tended to be transient for equity markets. Investors with a defined time horizon and appropriate risk appetite may find that disciplined positioning through volatility has historically served them better than reactive allocation changes.
Markets have a way of clearing, recalibrating, and rewarding those who stayed.
We are watching closely.
Ionic Macro Desk
Disclaimer: This publication has been prepared by Ionic Wealth for informational purposes only and does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security or financial instrument. The views expressed herein reflect current assessment based on publicly available information and are subject to change without notice.