Every geopolitical conflict sees institutional funds follow the same path.
TechFlow Selected TechFlow Selected
Every geopolitical conflict sees institutional funds follow the same path.
How should one position oneself amid the Israel–Hamas conflict?
Navigating Web3 tides with focused insightsAuthor: Felix Prehn 🐶
Translated and edited by TechFlow
TechFlow Intro: The author is a former investment banker. The value of this article lies not in predicting the trajectory of the conflict, but in unpacking a three-stage institutional capital flow model that has recurred across the Gulf War, the Iraq War, and the Russia-Ukraine War. Retail investors consistently lose money during conflicts—a systemic error—and this article pinpoints the specific reasons and corresponding strategies. Its logic is far clearer than analyses driven by emotion.
Full Text Below:
News about the U.S. and Iran is everywhere right now.
If you’re wondering whether this conflict can be profitable—yes, it can. Here’s exactly how.
I spent years working at an investment bank, specializing in what Wall Street coldly calls “event-driven opportunities.” That’s their polished term for war. In every major conflict—the Gulf War, the Iraq War, the Russia-Ukraine War—the same three-phase market pattern emerged, determining where institutional capital flows next.
Phase One: Shock—retail panic selling.
Phase Two: Re-pricing—the market calms and reassesses.
Phase Three: Rotation—institutional capital flows into new sectors.
The U.S.-Iran conflict is following the exact same script. The shock phase has already begun. What comes next—and where real money flows—can be anticipated, as long as you know what to look for.
That’s exactly what I’m giving you here.
What Retail Investors Do vs. What Institutions Do
When conflict breaks out, retail investors typically do one of three things:
Convert everything to cash—thinking they’re playing it safe, when in fact they’re guaranteeing erosion by inflation.
Freeze—staring at a sea of red, paralyzed, doing nothing.
Or chase whatever just spiked—oil, defense stocks, gold—buying at precisely the wrong time, driven by fear and lacking any plan.
Meanwhile, institutions managing billions of dollars aren’t doing any of these things. They’re repositioning based on decades of research into the patterns of conflict—not emotion, but patterns.
I’ll teach you the same thing.
A Pattern That Repeats Every Time
In the first 10 days after a geopolitical conflict erupts, the S&P 500 falls 5%–7%. It flattens out around day 35. And 12 months later, it rises 8%–10%—roughly the market’s average annual return in any normal year.
Real historical examples:
During the Gulf War, the S&P delivered an annualized return of 11.7%. In the 12 months following the war’s end, it rose 18%.
During the 2003 Iraq War, the market rose 13.6% within three months.
During the 2022 Russia-Ukraine War, the S&P initially fell 7%, then rebounded above pre-invasion levels within months.
Wars rarely destroy markets. They create uncertainty—and uncertainty creates sell-offs. Sell-offs create opportunity.
Why Iran Is Especially Important
Iran produces 3.3 million barrels of oil per day.
Any escalation—even perceived escalation—increases supply risk, and that risk ripples across everything.
The market doesn’t wait for actual supply disruptions; it prices in the *risk* of disruption upfront. Traders assume some oil production may halt, meaning supply falls while demand stays constant—pushing oil prices up. And oil is an input for nearly everything: transportation, manufacturing, shipping, food production, fertilizer, heating, and cooling.
Rising oil prices mean broad-based cost increases. Higher oil prices drive higher inflation. Higher inflation means the Fed may hold rates high instead of cutting. Higher rates mean more expensive mortgages, auto loans, and corporate borrowing. More expensive borrowing means lower corporate profits. Lower profits mean lower equity valuations.
The Three Phases of Every Conflict
Every geopolitical conflict drives capital through three distinct phases. Understanding which phase you’re in completely changes what you should do.
Phase One: Shock
This phase is fast, fierce, and driven by emotion and algorithms. Oil surges. The VIX—the market’s fear index—spikes. Risk assets plunge. Biotech, high-growth tech, and speculative names are all dumped as capital rushes into safe havens. Gold rises. Financial media shifts into 24/7 rolling coverage designed to maximize your fear.
This phase lasts days—or sometimes weeks. If you buy oil, gold, or defense stocks here, you’re almost certainly buying at the top. Emotional impulse peaks at this moment—which is precisely why acting now is the most expensive mistake you can make.
Phase Two: Re-pricing
Panic subsides. The market begins to think—not feel.
Questions shift from “What happened?” to “What happens next?” Is this temporary or structural? Will inflation stay elevated? What will the Fed do? Is the supply chain permanently disrupted—or merely under temporary strain?
This is when institutions begin repositioning—not amid the chaos of the first few days, but in the clarity that follows. This is where smart money makes money: in the calm after the storm—not during it.
Phase Three: Rotation
Capital flows out of impacted sectors and into sectors that benefit in the new reality.
Where Money Actually Flows
First: Energy—but not the way you think.
The obvious play is oil—and yes, oil outperforms in the short term. Bank of America’s study of 90s geopolitical shocks found oil was the best-performing asset, rising on average 18%. What you want to own are companies that benefit from persistently high oil prices: pipeline operators, storage terminals, energy infrastructure firms—those that collect tolls on oil movement regardless of where oil prices go.
Second: Defense—but focus on structural, not headline-driven, exposure.
Yes, defense stocks surge immediately. Since tensions escalated, some have risen over 30%. But defense spending isn’t a one-quarter event. Governments sign 10-year procurement contracts. Large contractors carry backlog orders in the hundreds of billions. Focus on companies positioned to capture multi-year spending cycles.
Third: Gold and silver—a longer-term positioning.
Gold spikes in Phase One—but unlike oil, it tends to stay elevated. Bank of America data shows gold continues to outperform by an average of 19% six months after a shock. Because the drivers behind gold’s rise—higher inflation, central bank money printing, institutional safe-haven demand—don’t vanish when headlines fade. If this conflict drags on, oil stays high, and inflation remains sticky, the Fed cannot cut rates. That environment is precisely where gold shines brightest.
Fourth: Companies with pricing power.
This is the point most people miss. If inflation remains elevated long term, you want companies able to pass higher costs onto customers without losing them: strong brands, high gross margins, and businesses whose customers lack cheaper alternatives.
Which sectors get hurt: In such environments, utilities and real estate typically underperform. Persistently higher interest rates compress valuations in both sectors. If you’re overweight either, it’s worth reviewing your positions.
What You Should Actually Do
Don’t panic-sell. Decades of conflict data are crystal clear—selling during the initial shock locks in losses and guarantees you miss the rebound. Don’t chase what’s already surged. If it’s made headlines, you’re already late. Don’t watch war coverage.
Keep your core portfolio intact—high-quality companies with strong brands, high gross margins, and pricing power.
Then review your holdings and ask two questions: Which positions are most vulnerable in this environment? Where is institutional capital flowing—and where do I have no exposure yet?
You’re not overhauling your portfolio—you’re tilting it: making measured, timely repositionings toward sectors where institutional capital is already moving—before the headlines catch up.
This concerns your livelihood. Your retirement. Your family’s financial security.
Get risk management right—and you’ll profit. That’s the least exciting thing I can say. But it’s true.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
@felixprehn
