Patiently Active: Investing with Heightened Geopolitical Risk

This newsletter was written on March 12, 2026, with the information available at that time.

Negative economic shocks, tariff announcements, and the start of wars have at least one thing in common: they don’t come with calendar reminders or detailed pre-event notes. Sure, you might see them coming, but the length, breadth, severity, and ramifications? Well, those are a toss-up for everyone, aren’t they? With the flick of a pen, governments and markets must rewrite their assumptions and rechart their own futures almost overnight.

The operation-turned-war in Iran, now two weeks old and intensifying, is the latest reminder that the world doesn't pause for our financial plans. Instead, we have to pause, take in the world, and adjust our own paths forward with focused discipline.

Resetting the foundation

One of the earliest public reactions to these types of previous announcements can be observed in the publicly traded securities markets. Whether it was sweeping or confined to a single sector, aggressive trading behavior got underway quickly. Rather than act immediately, my next steps would be as follows: 1) inhale, exhale, 2) read, 3) read more, and 4) listen to people who are smarter than me.

In this current case, that has looked like watching hours of financial broadcast programming, reading page after page on the Strait of Hormuz and the oil market, and then looking at my coverage to see where there are direct hits versus indirect hits. Then and only then do I ponder how I create my own model.

It is imperative for active investors to deconstruct these events as much as possible, because that is not the average headline’s objective. Sometimes breaking down the big scares into smaller parts can help sort through the noise and narrow down a more discrete set of risks. It’s my belief that this gap between fear and understanding is where disciplined investors can find opportunity.

It’s also why one of the hardest parts of staying invested in these times is accepting what we can't predict. To be clear, no one in the markets is predicting anything with regular, repeatable, 100% accuracy. With the right combination of knowledge, modeling acumen, and luck, sometimes you’ll “get it right.” Still, at the end of the day, it’s always a guess. If you know a guy with a crystal ball, please come and find me. So, even though most of us didn’t have a crisis in the Strait of Hormuz in our Bingo card, we’re not completely helpless; there is much to take away from even an elementary deconstruction of global oil markets.

Following the flow

It’s well known that oil trades at a global price, but for the sake of the analysis, let’s first look at the picture in the U.S. alone. In 2025, the United States was a net exporter of refined petroleum products and a net importer of raw crude.^1-2 Of what we did import (crude and petroleum products combined), Canada supplied roughly 57%, with Mexico, Saudi Arabia, Iraq, and Brazil rounding out the top five.³ Both net imports and net exports of crude oil declined by 3% in 2025 vs. 2024 despite a 3% increase in crude oil production, with more crude going to U.S. Strategic Petroleum Reserves.² U.S. imports through the Strait of Hormuz accounted for only about 7% of total crude imports and around 2% of our petroleum liquid consumption. Plus, the U.S. is less dependent on Persian Gulf imports now than at any time in the past 40 years.⁴ If this is all true, what’s with all the pressure at the pump?

As it happens, the free flow of trade through the Strait of Hormuz isn’t the concern of any one country. Instead, the war-induced closure affects global commerce. About 20% of the world's oil and 20% of global LNG flow through that narrow passage, with an estimated 84% of the Strait’s crude volume heading to Asian markets — China, India, Japan, and South Korea. That’s why Japanese refiners have requested emergency stockpile releases;⁵ Chinese refineries have cut operating capacity and halted exports for certain refineries;⁶ and South Korea and Japan hold only weeks of LNG reserves.⁷ The direct pain from this disruption falls disproportionately on Asia, but it doesn't stay there.

This is where we get a little into the muck. The U.S. primarily produces "sweet, light" crude — ideal for refining into gasoline. The Middle East produces "sour, heavy" crude, which is the feedstock for diesel, jet fuel, and asphalt. That heavier oil is also produced in Canada, Mexico, and Venezuela. When sour crude supply tightens up, logistics companies, infrastructure operators, and airlines usually feel it most acutely. We’ve seen this in stock price behavior. When it comes to gasoline, well, industry needs energy to make it “go”. This means the cost of virtually all goods and services can be exposed to higher energy costs because of the interconnected nature of transit/logistics and consumption. Even still, understanding this distinction between the types of products, their uses, and where each country gets the bulk of its supply permits the application of different risks where appropriate. This, in my view, better suits the active investor than a broad brush stroke of “oil is up” panic.

One price, one slide? Maybe not

Even with all the above holding true, there’s no insulation, per se, just slightly different outcomes from country to country and firm to firm. The good news is that the American economy is structurally more resilient than it was during the oil crises of the late 1970s. Analysis from Apollo Global Management's macro team suggests that even a persistent $100-per-barrel scenario should produce only a modest drag on the U.S. economy — roughly 0.7 percentage points of additional headline inflation, a marginal uptick in unemployment, and a slight dip in GDP.⁸ This is again due to the U.S.’s amped up crude and petroleum exports and stockpiling, plus a handsome increase in energy efficiency. We require significantly less oil per unit of GDP than we did a decade ago.⁸ So, pending future, prolonged disturbance (which is very much a possibility), the U.S. economy might not be quite as injured as headlines imply. This brings us to the final question: what now, then?

Treating what we can’t cure

Despite the nuance we’ve parsed out above, companies that are completely unaffected by the ongoing conflicts in the Middle East, and all over the world for that matter, are pretty hard to come by. Depending on how deep you get into the weeds, to me, they don’t actually exist. If you can’t achieve immunity, and prevention is obviously out of your control, the next best solution is access to treatment. That, my friends, is where active investing can take the cake. Rather than dumping entire industries out of fear, we can take a moment, recognize that this is everyone’s problem, and determine who we think is best suited for survival and recovery. This could look like logistics companies with superior contract arrangements, manufacturing companies with comparatively advantageous supply chain financing, or even a simple CPG company with a higher-income customer base that can absorb the pass-through.

The fog of war makes precision impossible, but a clear framework still matters. Holding fast to the principles we’ve discussed here in the past could serve you quite a bit better than you might think.

Until next time,

Shelby