Geopolitics and Oil: Understanding the Impact… Without Giving In to Panic

Geopolitical tensions between the United States, Iran and Israel: what will the impact be?

Geopolitical tensions in the Middle East, particularly those involving Iran, regularly resurface in the news and raise concerns about the direction of oil prices and financial markets. This type of situation is nothing new, and history offers useful reference points for better understanding — and putting into perspective — the economic and stock market impacts.

Looking back at the 1979 oil shock: a history lesson

One of the most striking episodes remains the 1979 oil shock, which occurred in the wake of the Iranian Revolution. At the time, Iranian oil production fell sharply, creating great uncertainty about global supply. Although the actual drop in world supply was relatively limited (around 4 to 7%), the fear of future shortages and speculation sent oil prices soaring, with prices more than doubling in less than a year.

This episode illustrates a key point: oil markets often react as much to the perception of risk as to hard facts.

Geopolitical conflicts and oil: the same market reflex

Even today, Iran occupies a strategic position in the global energy market, notably because of the Strait of Hormuz, through which roughly one fifth of the world’s seaborne oil passes. Any military escalation or threat to this trade route generally triggers a rapid rise in oil prices, even when physical disruptions remain limited.

However, unlike in the 1970s, the modern oil market has more developed stabilization mechanisms, including strategic reserves, more diversified production and greater coordination among producing countries.

OPEC+’s key role in calming prices

It is precisely in this context that the official OPEC+ communiqué of March 1, 2026 was issued. The group’s eight main producing countries announced a gradual production increase of 206,000 barrels per day starting in April 2026, while reaffirming their commitment to market stability.

OPEC+ also highlighted:

• the current low level of global inventories,
• the strength of economic fundamentals,
• and its flexibility to adjust production (increase, pause or reduction) as tensions evolve.

This message is clearly intended to reassure markets and prevent a lasting surge in prices, even in a tense geopolitical context.

And what about Canadian equities?

For Canadian investors, a rise in oil prices is not necessarily bad news.

Historically:

• Energy sector companies (producers, pipelines, oilfield services) benefit directly from higher prices.
• The Canadian stock market, heavily weighted in natural resources, tends to outperform many international markets during oil bull cycles.
• Some banks and insurance companies benefit indirectly from the improved profitability of the energy sector.

Conversely, sectors such as transportation and consumer goods can come under short-term pressure, which reinforces the importance of proper diversification.

To give you an example, in 1979 the Canadian stock market posted a positive year at +38.4%. Supported by the markets: the energy, natural resources and financial sectors.

In conclusion: keep a cool head

Geopolitical conflicts linked to oil can cause short-term volatility, but history — from 1979 to today — shows that:

• markets have a strong capacity to adapt,
• price increases are often temporary,
• and Canada is structurally well positioned when oil appreciates.
  
  As always, a disciplined investment strategy, aligned with your long-term goals, remains the best response to the ups and downs of the news.

The strength of a team

Since 2014, the team at Pérennité Gestion de Patrimoine has supported its clients with rigour and commitment in achieving their financial goals. Drawing on our expertise in financial services, we do everything we can to offer suitable, sustainable and well-thought-out solutions. Excellence guides everything we do, but above all it is passion that drives our work every day.

Any questions?

Do not hesitate to get in touch with a member of our team to discuss your portfolio’s positioning.

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