Investors looking to adapt portfolios in response to the geopolitical volatility sparked by the Iran conflict should consider oil and gold in the short term while being quick to recognise potential long-term opportunities linked to a transitioning economy.
That's the view of Charles-Henry Monchau, chief investment officer of Syz Group, who thinks the surge in oil prices triggered by escalating tensions in Iran has less to do with 1970s-style stagflation than with a structural rotation that has been building for years.
A coordinated US-Israeli offensive launched on 28 February struck military targets across Iran and killed supreme leader Ayatollah Ali Khamenei. Iran responded by effectively closing the Strait of Hormuz, through which roughly a fifth of global oil supply passes, driving fuel prices sharply higher worldwide. This has reignited fears of a prolonged energy supply disruption, sending oil prices sharply higher and prompting investors to reach instinctively for the stagflation playbook.
This led investors to price in the risk of ‘stagflation’, or an economy stuck in a damaging combination of high inflation and stagnant or contracting growth. Normally, these two conditions cancel each other out as weak growth suppresses prices and rising prices signal a hot economy. But when they coincide, central banks face an impossible choice, as the tools that cool inflation tend to deepen the slowdown and the tools that stimulate growth tend to worsen prices.
Stagflation concerns surface every time oil spikes, as investors worry that we are in for a repeat of the 1970s oil crisis. However, Monchau said: “The comparison to the 1970s and early 1980s, the defining stagflation era, requires a great deal more scrutiny than most headlines allow.”
Stagflation in its classical form demands more than an oil spike. Monchau described the condition as “a toxic and sustained combination: entrenched inflation running well above target, stagnating or contracting economic output, and – critically – an absence of policy tools capable of breaking the cycle without making things worse”.
The US met all of those conditions in 1973 and again in 1979 but the strategist argued that it does not today.
While US consumer price inflation averaged above 7% for much of the 1970s and peaked above 13% in 1979, today’s inflation, while elevated relative to the post-2008 era, has been declining since its 2022 peak. Central banks have established credibility that the Burns-era Federal Reserve did not and inflation expectations remain anchored. Monchau said that "not a minor technical distinction — it is the central difference."
The growth picture reinforces the case with real GDP continuing to expand, the labour market holding (albeit with some softening at the margins) and the consumer remaining employed and spending. Corporate earnings, outside interest-rate-sensitive sectors, have held up.
In Monchau’s view, "an oil shock is a headwind, not a recession trigger, when the underlying economy is running on a fundamentally sound base”.
The supply-side contrast supports this argument, he said. The 1970s shocks were deliberate OPEC embargoes targeting Western economies, a stranglehold on a commodity with no domestic alternative. Today, the US is the world's largest oil producer and the shale revolution has fundamentally changed the supply equation.
Monchau said: “There is upward inflationary pressure from energy and there is some drag on growth at the margin. But stagflation, as an economic condition, requires more than an oil spike. It requires a broken economy, which we do not have.”
Monchau’s geopolitical playbook
Having dismissed the looming stagflation threat, Monchau said the more instructive question is what the oil surge actually signals about where markets are heading.
Monchau highlighted a useful pattern across the past 90 years of major geopolitical shocks: oil is the best-performing major asset in the first three months after a shock, rising roughly 18% on average. Gold gains around 6% over the same period, with equities posting a modest 4%, often on relief that the shock was contained.
The picture shifts materially at the six-month mark, he argued. Gold continues climbing, averaging gains of around 19%. Equities stall and fade. Oil gives back most of its initial surge as supply adjusts and the fear premium deflates.
“Trade oil on the shock, own gold through the uncertainty. The geopolitical risk premium is real but transient in oil,” Monchau suggested.
When it comes to gold, the CIO argued that the dynamic is fundamentally different. Where oil’s risk premium reflects immediate supply anxiety, gold’s tends to crystallise into something more durable.
He described this as “a reflection of deeper anxieties about dollar credibility, fiscal trajectories and the reliability of paper-based stores of value”.
Buy builders for the structural rotation
For most of 2024 and 2025, equity markets ran on a single playbook: buy artificial intelligence. Capital flowed into a narrow group of mega-cap technology platforms spending billions on AI capacity.
“The thesis was self-reinforcing: AI would dominate, therefore own the dominators,” Monchau noted.
In 2026, the leadership started to rotate, with Monchau pointing out that the biggest winners are no longer the AI spenders but “the companies building the physical infrastructure that makes AI possible: semiconductors, materials, energy systems, industrial supply chains”.
The new short positions cluster around the mega-cap platforms, which face rising costs and structurally disrupted software revenues.
“This is not merely a sector rotation,” he added. “It reflects a deeper repricing of a decades-long imbalance.”
Capital markets spent years rewarding companies that consume resources whilst starving the industries that produce them, as asset-light businesses were favoured by investors over so-called old economy stocks.
“Software was described as eating the world. Physical economy businesses – miners, drillers, utilities, industrials – were treated as legacy industries, underinvested and undervalued,” Monchau said.
“Yet the physical economy never disappeared. And its centrality is now accelerating, not declining.”
AI data centres consume electricity at a scale that is putting grids across the US, Europe and Asia under strain, while electrification requires copper at a scale existing mine supply cannot easily meet.
Reindustrialisation demands steel and critical minerals hollowed out by three decades of offshoring. The commodity underinvestment cycle has run for nearly 15 years.
Monchau argued that “when capital begins to recognise a multi-year supply deficit in strategically critical commodities, the repricing can be dramatic and sustained”.
Implications and positioning
Investors who position for stagflation will be overweight defensive assets at the wrong moment, the strategist warned. He argued that the stagflation narrative puts the current environment as a period of pain that will pass over when the economy returns to its ‘normal’ condition.
“That framing is wrong in both directions,” he said. “It overstates the macroeconomic risk. The economy is not broken, inflation is not entrenched and growth is not collapsing.”
The second reason he thinks this framing is wrong is because it understates the structural opportunity: if we are at the start of a sustained rotation from paper assets to real ones, then investors need to respond with long-term positioning, not portfolio protection.
Highlighting the long side of the trade, Monchau pointed investors towards “builders over spenders, physical infrastructure over digital platforms, scarce hard assets over abundant financial ones”.
He also argued that structural rotations tend to last longer and go further than consensus expects once they get started, therefore themes like AI power consumption, electrification and reindustrialisation are just beginning and may have much further to run.
“This is not the 1970s,” he finished. “But it may be the beginning of something comparably significant: a prolonged regime shift in which the physical economy reclaims its place at the centre of capital markets – and rewards investors who recognised it early.”