This month, Wealth Adviser Sam de Court is joined by Pie Funds’ Founder and Chief Investment Officer Mike Taylor and Wealth Adviser Simon Hepple to discuss rising oil prices, the lessons we can learn from past energy shocks, and how markets might react moving forwards.
Watch the video or read the full story below.
Staying focused amid geopolitical noise
Markets have been navigating a period of heightened geopolitical tension, with headlines shifting rapidly day to day. While uncertainty can feel unsettling, our focus remains firmly on what matters most: the underlying data and long-term investment fundamentals.
Oil prices: the key transmission mechanism
At the centre of the current environment is oil. Historically, energy shocks have accompanied major geopolitical conflicts, but it’s important to keep today’s move in perspective.
While oil prices have risen meaningfully, the increase (~70%) is still well below the average surge seen in past crises (~170%).1 Additionally, the global economy is less dependent on oil than it was decades ago, helping to cushion the overall impact.
A useful way to think about this is through a simple analogy: like New Zealand milk prices, commodities are priced globally. Producers will sell to the highest bidder, meaning domestic consumers still pay international prices. The same dynamic applies to oil markets worldwide.
What history tells us about markets and conflict
History shows that markets often react negatively in the short term during periods of conflict - but tend to recover strongly once uncertainty begins to resolve.
For example:
During the first Gulf War in 1990, the S&P 500 index declined around 10% during the conflict but was up 13% one year later, 27% after two years, and 38% after three.2
A similar pattern followed other Middle East conflicts, with the S&P 500 rebounding strongly after initial declines.
The key takeaway: short-term volatility driven by oil shocks does not necessarily translate into poor long-term returns.
Possible scenarios from here
We see three broad paths forward:
- De-escalation (most likely): Tensions ease, stabilising oil prices and supporting markets.
- Prolonged conflict (possible): Higher oil prices persist, potentially weighing on growth and sentiment.
- Regime change (low probability): A more definitive resolution, though less likely.
While outcomes are uncertain, markets have historically followed a similar recovery pattern once conflicts resolve - even if delayed.
What we’re watching
We’re closely monitoring several key indicators:
- Volatility (VIX): Elevated levels can signal potential buying opportunities
- Market sentiment: Currently cautious, though markets haven’t sold off significantly
- Sector rotation: Shifts toward defensive assets vs growth
- Earnings expectations: No meaningful downgrades yet, but under watch
The bottom line
Periods like this test investor discipline. But the lesson remains consistent: reacting emotionally to short-term volatility often leads to poor outcomes.
As always, our message is simple - stay the course.
1. Pie Funds research as at 17 March 2026
2. Source: S&P 500 Index data via Consilium
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