How Investors Can Adjust to the Geopolitical Risk Sparked by the Iran Conflict—Experts Weigh In

• Energy sector stocks rose only 2% on Monday despite WTI crude oil jumping over 7%, suggesting E&P companies remain undervalued with free cash flow yields nearly double the next closest sector (telecom)
• About 20% of global oil and liquefied natural gas supplies move through the Strait of Hormuz, where Iran controls a significant portion, creating supply disruption risks that could drive prices higher
• Investors can use single-stock volatility for tax-loss harvesting by selling underperforming positions and buying similar assets (e.g., switching from S&P 500 to Russell 1000, or Coke to Pepsi) to capture tax benefits without changing market exposure

Summary: Investment Strategies Amid Iran Conflict Escalation

Key Market Response:

U.S. and Israeli strikes on Iran over the weekend triggered significant market volatility on Monday. WTI crude oil futures surged over 7%, while the S&P 500 Energy Sector Index gained approximately 2%. Major market indexes recovered from steep early-session declines.

Energy Sector Opportunities:

Adrian Helfert, CIO at Westwood, recommends "buying the news" in energy stocks, noting that exploration and production (E&P) companies remain undervalued relative to oil price increases. Leading E&P gainers included APA Corp and ConocoPhillips, both up roughly 4%. Helfert emphasizes E&P companies offer nearly double the free cash flow yield of the next-closest sector (telecom).

Morgan Stanley echoed this view, recommending investors maintain energy sector exposure with a "quality bias," targeting upstream companies, integrated producers, and refiners. The firm highlighted that 20% of global oil and liquefied natural gas supplies transit through the Strait of Hormuz, which Iran partially controls, creating supply disruption risks.

Portfolio Management Strategies:

Jamie Battmer, CIO at Creative Planning, advises investors to focus on controllable actions rather than making active market bets. He recommends strategic tax-loss harvesting during volatility—selling underperforming positions and rotating into similar investments (e.g., selling S&P 500 for Russell 1000, or swapping Coke for Pepsi).

Risk Assessment:

Battmer suggests using this event as a portfolio review trigger, particularly for investors experiencing disproportionate losses compared to broader market movements. Helfert warns the conflict could escalate regionally, potentially disrupting global power dynamics beyond direct military engagement.