AOR Update: Buy the geopolitical dip?

Escalating conflict between the US, Israel, and Iran has sparked a bout of volatility, with oil prices jumping and global equities pulling back. History suggests that such “geopolitical dips” have often created attractive entry points, as broader economic conditions typically matter more for equity returns than short-lived military flare-ups. Today, those fundamentals remain supportive: the ClearBridge US Recession Dashboard still signals expansion and the US economy is better insulated from energy shocks thanks to its role as a net producer and households’ lower share of spending on energy.

While higher oil prices may nudge inflation expectations up and have already pushed Treasury yields above 4%, the Fed is likely to treat this as a temporary supply shock rather than a reason to derail plans for rate cuts later this year. Against this backdrop, advisors and investors may want to look through near-term volatility and consider selectively adding risk on weakness, with an eye on oil markets as the key transmission channel from geopolitics to growth.