Yet another brick in the wall…
The military actions in the Middle East over the weekend represent another spasm of geopolitical uncertainty that carries potentially significant and global risks. There are the obvious humanitarian impacts; how the situation evolves may well carry material political implications, not just in the region, but more broadly across the world (war is not popular across the U.S. and the midterms are on the horizon); and the economic effects have the potential to be significant depending on the degree to which crude and natural gas supply is restrained either due to damage to infrastructure in the region or closures of the Strait of Hormuz, through which an estimated 20% of the world’s liquified natural gas and 25% of seaborne crude oil passes annually. As well, the potential for sustained higher energy prices could have wide-reaching ripple effects through supply chains, which could exert upward pressure on both overall and underlying inflation, which, in turn, would factor into monetary policy decision-making.
Barring a rapid and sustainable resolution, the fluidity of the situation means that it will be difficult to get a clean read on the scale of the overall impact. The depth and duration of any hit to the global economy will depend on how long this conflict lasts and whether or not it expands into other regions — the longer it persists and the further it escalates, the more it will weigh on consumer and business sentiment, and potentially restrain growth and put upward pressure on prices.
For their part, financial markets will likely be vulnerable to headline risks, and the ebbs and flows of developments on this front will likely weigh on investor sentiment in the days to come. Importantly, however, if history is to serve as a guide, any impact of geopolitical risk events typically has proven to be short-lived and has been followed by fairly rapid recoveries.
The table below (Figure 1) highlights the performance of the S&P 500 Index1 around some major historical geopolitical risk events — including several in which Iran was involved. As per these data points, while these historical risk events had a near-term impact, they did not leave deep or lasting scars. Stock prices tended to decline in the immediate aftermath of the event and remained modestly down for the next month on average; however, they also tended to have recouped lost ground within three months, and moved up fairly solidly 12 months later.
Figure 1: S&P 500 performance around major geopolitical events
Shading indicates events occurring in the context of a broader economic downturn; source: Guardian Capital LP, author’s calculations using data from Bloomberg and the Federal Reserve Bank of St. Louis to March 2, 2026
In other words, any impact on financial markets does not last forever; rather, it represents another brick in the “wall of worry” that bull markets climb.
Ultimately, sentiment has normalized from extremes and the underlying macroeconomic fundamentals have provided the needed thrust to get the market up and over the wall (the shading in the table above (Figure 1) indicates events that occurred in the context of recessionary environments and are the only ones in the last six decades to coincide with prolonged market weakness aside from the inflation and rate hiking-induced selloff that began in 2022) — and currently, despite everything going on, the economic drivers remain generally positive.
Figure 2: S&P 500 Composite Price Index and the “Wall of Worry”
(index)
Source: Guardian Capital LP, using data from Bloomberg to March 2, 2026
So, with this in mind, it is worthwhile to reiterate that while an uptick in uncertainty and market volatility may drive a knee-jerk reaction to pull money out of the market until the dust settles (though, selling is not overly evident in North American equities at the moment), history has shown time and time again that allowing emotion to drive the investment decision-making process is bad for investors’ wealth, as short-sighted and undisciplined reactions to short-term events can carry significant negative implications for long-term portfolio performance.
It is never apparent until after the dust has settled, and often there is no discernible reason as to why the market bottoms on the day it actually does. Being in cash as markets fall may well have felt like a great move, but it also typically means that investors find themselves on the sidelines when markets recover — and being even a day late in getting back into the market can have significant negative performance implications in the long-run, as evidenced in the chart below (Figure 3).
Figure 3: Long-term impact of missing the best days in the market
(annualized percent change; U.S. dollar basis)
Source: Guardian Capital LP, author’s calculations using daily data from Bloomberg from January 1, 1980, to February 27, 2026
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David Onyett-Jeffries
David Onyett-Jeffries is Vice President, Economics & Multi Asset Solutions, at Guardian Capital LP (GCLP). He provides macroeconomic guidance to GCLP and its affiliates. Additionally, he is a portfolio manager of GCLP’s multi-asset portfolios and funds and works closely with GCLP’s Directed Outcomes team.
1 The S&P 500 is an index of 500 stocks designed to reflect the risk/return characteristics of the large-cap US equity universe.
2 The MSCI World Index captures mid- and large-cap representation across 23 developed market countries.
3 The S&P/TSX Composite Index is the benchmark Canadian index, representing roughly 70% of the total market capitalization on the Toronto Stock Exchange (TSX) with about 250 companies included in it.
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Published: March 3, 2026
