By Darren Katz

The geopolitical temperature in the Middle East is rising. The United States has increased its military posture in the region, naval assets are repositioning, and rhetoric between Washington and Tehran is intensifying. Whether conflict becomes kinetic or remains contained, markets are beginning to price risk. Investors do not need to predict war to prepare for it. They need to think clearly about probabilities, second order effects, and portfolio construction.

When geopolitical tension spikes, markets move first on fear, then on fundamentals. The opportunity lies in distinguishing between the two. Below are three key areas investors should be actively assessing in portfolios right now. In two of them, I see opportunity. In the third, I see risk that is still underappreciated.

1. Energy Security and Infrastructure: Follow the Physical Reality

If conflict escalates, the immediate market reaction will centre on oil. Iran sits astride the Strait of Hormuz, through which roughly 20 percent of global oil supply flows. Even a temporary disruption would have outsized price implications. But the more important issue is not a short term oil spike. It is the structural repricing of energy security.

Governments have spent the last three years focused on inflation, interest rates and energy transition. A Middle East conflict would remind the world that hydrocarbons still matter. Supply reliability matters. Infrastructure redundancy matters. For investors, this shifts the conversation from commodity speculation to infrastructure positioning.

Areas of opportunity include:

• Midstream energy infrastructure
  • LNG export facilities
  • Strategic petroleum logistics
  • Pipeline operators
  • Defence-adjacent energy systems

These businesses are not simply oil price bets. They are toll roads on global energy flow.

We have already seen how energy shocks following the Ukraine conflict reshaped European energy policy. A Persian Gulf disruption would accelerate capital allocation into alternative supply chains, regional energy independence, and strategic storage capacity.

The opportunity is not in chasing the first oil spike. It is in owning the infrastructure that benefits from structural capital spending. Investors should be asking: which companies earn stable cash flows regardless of short term price volatility, but benefit from increased strategic importance?

That is where the asymmetric upside sits.

2. Defence and Strategic Technology: A Structural Re-rating

Every modern conflict reinforces the same lesson: warfare is becoming more technological, more digital, and more capital intensive. Defence budgets were already rising across the US, Europe, and Asia before this latest tension. A sustained Middle East conflict would likely accelerate procurement cycles. Opportunities here extend beyond traditional weapons manufacturers.

The modern defence ecosystem includes:

• Cybersecurity platforms
  • Drone technology and counter-drone systems
  • Missile defence systems
  • Satellite and communications infrastructure
  • AI-enabled battlefield analytics

Investors often hesitate to allocate to defence due to ethical considerations or cyclicality concerns. But the geopolitical environment has shifted. Western governments are realigning industrial policy toward resilience and deterrence.

In previous cycles, defence stocks experienced short sharp rallies during conflict and then retraced. Today feels different. Supply chains are being rebuilt. Production capacity is expanding. Orders are multi-year. The key is selectivity.

Investors should avoid chasing companies trading purely on headline momentum. Instead, focus on businesses with long-term contracts, visible backlog, and technological differentiation. The structural trend is clear: national security is no longer optional expenditure. In an uncertain world, governments rarely cut defence budgets.

3. Rate-Sensitive Growth and Consumer Discretionary: The Area of Caution

Here is where I would exercise caution. A Middle East conflict is inflationary at the margin.

Higher oil prices feed into transport costs, food prices, manufacturing inputs, and ultimately consumer inflation. If inflation expectations reaccelerate, central banks may be forced to pause or even reverse easing trajectories. Markets currently expect a gradual normalisation of interest rates. A sustained energy shock complicates that narrative.

The asset class most vulnerable in that scenario is long-duration growth. High multiple technology stocks, consumer discretionary names reliant on strong sentiment, and businesses dependent on cheap capital can reprice quickly if bond yields move higher. We saw this dynamic in 2022 when rate volatility, not earnings collapse, drove valuation compression.

In a geopolitical shock, investors often underestimate the secondary impact on bond markets. The question to ask is simple: if oil remains 20 to 30 percent higher for six months, what happens to inflation expectations and the yield curve? If the answer implies higher real rates, then expensive growth assets deserve caution.

This does not mean abandoning technology or innovation. It means focusing on companies with real earnings, strong balance sheets, and pricing power rather than speculative future cash flows. Volatility does not destroy value. Leverage and overvaluation do.

The Portfolio Framework

In times of geopolitical tension, emotional reactions dominate headlines. But disciplined investors zoom out.

There are three guiding principles worth remembering:

1. Conflicts are inflationary before they are recessionary.
2. Governments respond with fiscal spending before austerity.
3. Markets overreact first, then recalibrate.

Portfolio construction should reflect these realities.

Tilt toward:

• Hard assets and infrastructure
  • Defence and strategic technology
  • Businesses with pricing power
  • Strong balance sheets

Reduce exposure to:

• Highly leveraged companies
  • Duration-sensitive speculative growth
  • Consumer discretionary reliant on confidence

Most importantly, maintain liquidity. Geopolitical shocks create forced sellers. Forced selling creates opportunity.

The TAMIM Takeaway

Investing through geopolitical uncertainty requires calm, not conviction theatre.

If the US and Iran move toward open conflict, markets will react sharply. Oil will spike. Defence stocks will rally. Bond markets will wobble. But the real money will not be made in the first week.

It will be made by owning structurally advantaged businesses that benefit from energy security, defence modernisation, and government capital allocation. And by avoiding overvalued assets vulnerable to renewed rate volatility.

We cannot control geopolitics. We can control portfolio positioning. In uncertain times, resilience becomes alpha. And portfolios built around cash flow, balance sheet strength, and strategic importance tend to outperform when headlines turn into history.