It has been a volatile month for your money. The Dow, the Nasdaq, and the S&P 500 are all down almost 6%. Oil prices are up over 40%. Food, energy and housing costs are also on the march. And much of it is tied to the Iran War which is sending shockwaves through all sectors of the economy — from a gallon of gas to energy prices, manufacturing to shipping costs, transportation to travel fees and, of course, the widespread pullback in the financial markets.
The conflict in the Middle East is no longer a distant headline. It’s showing up at your kitchen table and in your portfolio, impacting everything from your daily expenses — to your savings and retirement accounts.
The Impact of Oil Shock
Despite the advent of alternative energy sources, green technology and electric cars — oil is still the foundation of the global economy. This viscous, petroleum-based liquid touches almost everything. It powers vehicles, planes and ships and is a critical ingredient in the production of plastics, paints, fertilizers and even pharmaceuticals.
More than 50 years ago, the ‘Arab Oil Embargo’ similarly disrupted global crude supplies as Saudi Arabia and other OPEC members sought to punish America for supplying weapons to Israel amid the Yom Kippur War. The Arab states imposed a crippling ban on oil exports exposing the West’s dependence on foreign oil and its economic vulnerability with respect to energy security.
“Price increases wreaked havoc on economies and transport systems that were far less efficient than today. Inflation soon boiled over into ‘stagflation,’ a combination of economic stagnation and high inflation. Misguided policies, including gasoline price controls and rationing, exacerbated shortages, creating long lines at service stations and emboldening gasoline thieves.”1
The resulting oil price shock had a broad macro impact. It not only shrunk the size of U.S economy by 2.5%, it triggered higher inflation, rising unemployment, and fueled the punishing recession of the mid-1970’s which thrust the U.S. into one of the worse economic downturns since the Great Depression.2
Is the Worse Yet to Come?
In 2026, we find ourselves in yet another oil war with the Arab world. Middle East conflicts have always been particularly dangerous due to longstanding tensions, ethnic divisions, deep seated mistrust, and the sheer economic importance of fossil fuels.
The Gulf region sits at the juncture of politics, power struggles, and religious extremism. Even minor disruptions can send shockwaves through the brent crude markets, global supply chains, and the world’s interconnected financial systems.
And as the Strait of Hormuz remains effectively closed to oil tankers, the worst may be yet to come. Samantha Gross, director of energy security and climate at the Brookings Institute, issued this recent warning:
“We haven’t seen the brunt of it yet. I feel like markets are so far underestimating the effect of the war. It seems that they expect this war to go quickly, and they expect that we can go back to the world before when it’s over. And I don’t think either of those ideas is true.”3
The war with Iran has not exactly gone quickly or flawlessly. We’ve lost 13 service members, billions of dollars in military equipment, sustained damage to U.S. bases in Saudi Arabia, Kuwait and Bahrain, seen Wall Street stumble, and gas prices surge above $4/gallon.
All of this geopolitical strain puts pressure on your savings, retirement holdings, and financial security. Mohamed El-Erian, a top economist and former CIO of PIMCO, believes that the markets now have to contend with the possibility that oil demand shock will start to unfurl across the entire economy.4
Gold’s Protective Nature
In an environment like this, paper wealth can become extremely precarious. That’s why many investors turn to hard assets particularly gold which has historically served as a store of value during periods of war, inflation, economic uncertainty, and oil price shock.
During the recession that followed the Arab Oil Embargo of 1973, gold rose dramatically — soaring over 175% as detailed by Bankrate’s gold price history summary.
“By late 1973, the U.S. was entering a recession, and while the slowdown nominally lasted until early 1975, the stagflationary effects — a period of low growth in output and high inflation — characterized the decade. It seemed like a ripe climate, then, for gold investors. Prices zoomed. From around $70 in mid-1972, gold had climbed to north of $120 by May 1973. While it pulled back some toward the end of the year, it roared higher in December 1973 and then shot ahead to more than $170 in February 1974. Amid the rough economy of 1974, gold pulled back a little bit, but by the end of the year, it was threatening to hit $200.”5
This was not the first time gold has acted as a portfolio stabilizer, nor would it be the last. Who can forget the Financial Crisis of 2008 where stocks collapsed by almost 50% and gold surged by more than 100%. Or the Covid-19 pandemic where markets crashed while gold hit $2000/oz for the first time ever in August of 2020. Or the more recent inflation crisis of 2022 when gold started its long-term ascent — soaring 160% over the last four years.
Gold is not only an inflation hedge, a geopolitical safe haven, and a form of portfolio protection — it is also one of the few assets that has consistently performed well during periods of Wall Street volatility, geopolitical instability and global financial stress. This includes, of course, the energy and oil-driven conflicts that have repeatedly emerged from the Middle East.
A 2023 paper from Elsevier, “The protective nature of gold during times of oil price volatility: An analysis of the COVID-19 pandemic” examined gold and oil prices from 2006-2021 and concluded that gold is a significant portfolio buffer in the face of oil price volatility and broader economic distress:
“Our empirical outcomes show that gold serves as an important refuge against the fuel cost risks … This means that gold can protect investors from extreme negative movements in oil prices … The results of this research have repercussions for market players, governments, and investors. Understanding gold’s protective qualities during volatile oil price periods may help investors diversify their portfolios and develop risk management methods. In addition, acknowledging gold’s enduring value as a refuge throughout the COVID-19 epidemic highlights its significance as a dependable commodity for wealth preservation.”6
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1 https://www.bakerinstitute.org/research/arab-embargo-50-years-ago-weaponized-oil-inflict-economic-trauma-sound-familiar
2 https://www.csis.org/analysis/arab-oil-embargo-40-years-later
3 https://www.nbcnews.com/business/economy/oil-economy-worst-on-the-way-iran-war-rcna265779
4 https://www.businessinsider.com/stock-market-investing-economic-outlook-oil-demand-shock-el-erian-2026-3
5 https://www.bankrate.com/investing/gold-price-history/
6 https://www.sciencedirect.com/science/article/pii/S2214790X23000746
