Geopolitical risk and your portfolio: perspective over prediction
20th February 2026
Over the past few weeks, clients have understandably asked about rising tensions between the United States and Iran. As at 20 February 2026, headlines have focused on renewed diplomatic strain, military posturing in the Gulf region and the possibility, however remote, of escalation. Markets have reacted in the usual way: short bursts of volatility, movements in energy prices and a shift in sentiment.
We will not speculate on the likelihood of conflict. It is not our role to forecast military outcomes or interpret political signalling. Our role is to assess how geopolitical risk interacts with capital markets, and how portfolios should be structured to withstand it.
We will not speculate on the likelihood of conflict. It is not our role to forecast military outcomes or interpret political signalling. Our role is to assess how geopolitical risk interacts with capital markets, and how portfolios should be structured to withstand it.
What geopolitical risk typically does to markets
When tensions rise between major economies, markets tend to move in recognisable patterns:
However, it is critical to distinguish between immediate reaction and sustained impact. History shows that most geopolitical shocks produce sharp but temporary volatility. Unless the event materially damages global economic infrastructure or trade over a prolonged period, markets typically normalise.
This does not mean risks are trivial. It means markets are adaptive.
Which assets have historically performed well during conflict?
In periods of ongoing conflict involving major economies, certain asset classes have tended to hold up better:
Gold
Gold has traditionally acted as a hedge during systemic stress. It can benefit from fear-driven flows and from currency debasement concerns. That said, gold can be volatile and does not always move in a straight line during crises.
Government bonds
High quality sovereign bonds, particularly from developed markets, often attract capital during uncertainty. Falling yields can provide capital gains, partially offsetting equity declines.
Energy equities
If oil supply is threatened, energy producers can see improved margins. This is highly situation-specific and can reverse quickly if tensions ease.
Defensive equity sectors
Utilities, healthcare and consumer staples can prove more resilient than highly cyclical sectors in risk-off environments.
It is important to stress that positioning aggressively for any one outcome is usually unwise. Markets move on expectations, not events. By the time a retail investor reacts to a headline, pricing has often already adjusted.
When tensions rise between major economies, markets tend to move in recognisable patterns:
- Equity markets often experience short term drawdowns driven by uncertainty rather than fundamentals.
- Oil and gas prices can spike, particularly where the Middle East is involved.
- Government bond yields may fall as investors seek perceived safety.
- Gold often rises, at least initially.
- The US dollar frequently strengthens during acute risk events, reflecting its reserve currency status.
However, it is critical to distinguish between immediate reaction and sustained impact. History shows that most geopolitical shocks produce sharp but temporary volatility. Unless the event materially damages global economic infrastructure or trade over a prolonged period, markets typically normalise.
This does not mean risks are trivial. It means markets are adaptive.
Which assets have historically performed well during conflict?
In periods of ongoing conflict involving major economies, certain asset classes have tended to hold up better:
Gold
Gold has traditionally acted as a hedge during systemic stress. It can benefit from fear-driven flows and from currency debasement concerns. That said, gold can be volatile and does not always move in a straight line during crises.
Government bonds
High quality sovereign bonds, particularly from developed markets, often attract capital during uncertainty. Falling yields can provide capital gains, partially offsetting equity declines.
Energy equities
If oil supply is threatened, energy producers can see improved margins. This is highly situation-specific and can reverse quickly if tensions ease.
Defensive equity sectors
Utilities, healthcare and consumer staples can prove more resilient than highly cyclical sectors in risk-off environments.
It is important to stress that positioning aggressively for any one outcome is usually unwise. Markets move on expectations, not events. By the time a retail investor reacts to a headline, pricing has often already adjusted.
The problem with positioning for headlines
One of the most common behavioural errors we observe is short term tactical repositioning based on news flow. Clients understandably ask:
The difficulty is that geopolitical events are binary and unpredictable. Escalation may occur. It may not. Diplomacy may prevail. Markets may overreact, then reverse within days.
Attempting to reposition portfolios around each headline introduces timing risk. If escalation does not materialise, defensive positioning can underperform rapidly as markets recover.
Long term investors are generally better served by robust structural diversification rather than reactive shifts.
The Brigantia approach to geopolitical uncertainty
At Brigantia, we build portfolios on the assumption that geopolitical risk is constant. Not occasional. Constant. Humans will always human.
Over a 10, 15 or 20 year investment horizon, there will always be:
Rather than attempting to predict which event will dominate next quarter’s headlines, we focus on structural resilience.
This includes:
Geographical diversification
Exposure across North America, Europe, Asia and emerging markets reduces reliance on any one political regime or economic bloc.
Asset class diversification
Equities, fixed income, alternatives and cash-like instruments behave differently under stress. Blending these helps smooth volatility.
Currency exposure management
Holding assets across multiple currencies mitigates single-currency concentration risk.
Investment type diversification
Beyond traditional funds, certain specialist structures can provide defined outcomes. For more cautious investors, this may include capital protected or capital-at-risk structured solutions with clear maturity profiles. These are not used excessively, but selectively, as part of a broader allocation.
Risk-aligned allocation
Most importantly, allocations are aligned to each client’s capacity for loss and time horizon. A portfolio designed correctly at inception requires fewer emotional adjustments later.
Volatility versus permanent loss
There is a crucial distinction between volatility and permanent capital impairment.
Geopolitical events typically increase volatility. They do not automatically create permanent losses. Permanent loss tends to occur when:
A well-diversified portfolio held over an appropriate time frame has historically absorbed geopolitical shocks.
What clients should do now
For most long term investors, the correct course of action during periods of geopolitical tension is remarkably unexciting:
Where genuine structural risk has emerged, we will proactively assess it. Where noise dominates signal, discipline is the better response.
Perspective over prediction
Media cycles are designed to amplify uncertainty. Markets, however, are designed to price it.
The possibility of US–Iran escalation is a reminder that geopolitical risk never disappears. It rotates. Today it may be the Middle East. Tomorrow it may be trade relations (we're never really that far from a tariff announcement these days!), cyber risk or regional elections.
The investment question is not whether risk exists. It always does. The question is whether portfolios are constructed to endure it.
At Brigantia, our philosophy remains consistent:
If you have concerns about how current geopolitical developments may affect your portfolio, we welcome a structured review. In times of uncertainty, clarity is valuable.
Book a consultation below and ensure your allocation is built for resilience, not headlines.
One of the most common behavioural errors we observe is short term tactical repositioning based on news flow. Clients understandably ask:
- Should we reduce US exposure?
- Should we increase gold?
- Should we hold more cash?
- Should we rotate into energy?
The difficulty is that geopolitical events are binary and unpredictable. Escalation may occur. It may not. Diplomacy may prevail. Markets may overreact, then reverse within days.
Attempting to reposition portfolios around each headline introduces timing risk. If escalation does not materialise, defensive positioning can underperform rapidly as markets recover.
Long term investors are generally better served by robust structural diversification rather than reactive shifts.
The Brigantia approach to geopolitical uncertainty
At Brigantia, we build portfolios on the assumption that geopolitical risk is constant. Not occasional. Constant. Humans will always human.
Over a 10, 15 or 20 year investment horizon, there will always be:
- Regional conflicts
- Trade disputes
- Elections
- Policy shifts
- Currency crises
- Regulatory change
Rather than attempting to predict which event will dominate next quarter’s headlines, we focus on structural resilience.
This includes:
Geographical diversification
Exposure across North America, Europe, Asia and emerging markets reduces reliance on any one political regime or economic bloc.
Asset class diversification
Equities, fixed income, alternatives and cash-like instruments behave differently under stress. Blending these helps smooth volatility.
Currency exposure management
Holding assets across multiple currencies mitigates single-currency concentration risk.
Investment type diversification
Beyond traditional funds, certain specialist structures can provide defined outcomes. For more cautious investors, this may include capital protected or capital-at-risk structured solutions with clear maturity profiles. These are not used excessively, but selectively, as part of a broader allocation.
Risk-aligned allocation
Most importantly, allocations are aligned to each client’s capacity for loss and time horizon. A portfolio designed correctly at inception requires fewer emotional adjustments later.
Volatility versus permanent loss
There is a crucial distinction between volatility and permanent capital impairment.
Geopolitical events typically increase volatility. They do not automatically create permanent losses. Permanent loss tends to occur when:
- Investors sell quality assets during temporary drawdowns.
- Concentration risk is excessive.
- Leverage is misused.
- Time horizons are mismatched.
A well-diversified portfolio held over an appropriate time frame has historically absorbed geopolitical shocks.
What clients should do now
For most long term investors, the correct course of action during periods of geopolitical tension is remarkably unexciting:
- Review asset allocation.
- Confirm alignment with objectives.
- Ensure liquidity needs are covered.
- Avoid impulsive changes.
Where genuine structural risk has emerged, we will proactively assess it. Where noise dominates signal, discipline is the better response.
Perspective over prediction
Media cycles are designed to amplify uncertainty. Markets, however, are designed to price it.
The possibility of US–Iran escalation is a reminder that geopolitical risk never disappears. It rotates. Today it may be the Middle East. Tomorrow it may be trade relations (we're never really that far from a tariff announcement these days!), cyber risk or regional elections.
The investment question is not whether risk exists. It always does. The question is whether portfolios are constructed to endure it.
At Brigantia, our philosophy remains consistent:
- Diversify intelligently.
- Allocate according to evidence, not emotion.
- Incorporate specialist tools where appropriate.
- Focus on long term capital growth and preservation.
If you have concerns about how current geopolitical developments may affect your portfolio, we welcome a structured review. In times of uncertainty, clarity is valuable.
Book a consultation below and ensure your allocation is built for resilience, not headlines.
