How Geopolitical Tensions Could Impact Your Portfolio This Summer, and What to Do About It
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I don’t know about you, but to me it feels as if 2026 mashed the gas pedal to the floor on Jan. 1 and hasn’t let off it since. By the time I’ve gotten myself all caught up on the last news cycle, another thing happens that throws the markets into turbulence.
That’s all to say it’s a frustrating time to be an investor. It seems like markets react wildly to every headline and then swing back in the opposite direction just as quickly. Investors don’t like uncertainty. Geopolitical tensions are a chief cause of uncertainty and I expect current ones to linger at least through the summer. Here’s a brief assessment of what’s going on and what you can do to insulate your portfolio against it as much as possible.
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The Strait of Hormuz is crucial
The Trump administration’s ouster of Venezuela’s then-President Nicolás Maduro in early January kicked off the year’s international turbulence. February saw Israel and the U.S. attack Iran, and the status of the Strait of Hormuz has been, let’s just say, up for debate ever since.
As such, the stocks of any companies reliant on goods transported through the Strait of Hormuz should be handled with caution. Many Asian nations, such as Japan and South Korea, are heavily reliant on oil and natural gas exported through the strait, and their markets are expected to face stronger headwinds the longer it remains closed. Both can source natural gas and oil from nearby Russia, though. Japan has already begun doing so.
Chip manufacturers are also likely to feel pressure, as about one-third of the world’s helium is produced in Qatar (as a byproduct of natural gas refinement) and moved through the Strait of Hormuz, and helium is used in chip manufacturing.
The impact on helium will remain even if the strait is fully reopened. Earlier in the war, an Iranian missile strike damaged Qatar’s largest natural gas refinery at Ras Laffan and crippled the country’s production of both natural gas and helium. Repairs are expected to take between three and five years.
It’s interesting times all around
In addition to what’s happening in the Middle East, the Russia-Ukraine war is raging into its fifth year. Then there’s China and Taiwan. It’s no secret that Beijing wants to annex Taiwan, which it views as a breakaway province. The roots of the conflict go back to 1949.
But in the past couple of decades, China has developed the military capabilities to make an invasion of Taiwan feasible. And while the latest American estimates see an invasion before 2027 as very unlikely, it’s always a possibility.
You and I can’t really do anything about any of the situations above. All we can do is react to them. But there are a few steps you can take today to insulate your portfolio from further turmoil.
Turning to gold and silver
One of the easiest ways to insulate your portfolio from market chaos is to invest in precious metals. Gold and silver have both been on incredible bull runs over the past year. Gold is up 46% over the past 12 months and is just over $4,700/ounce as I write this. Silver has outperformed gold dramatically — it’s up 141% to just shy of $80/ounce.
Don’t worry, though, you don’t need to pay $5,000 for an ounce of physical gold or $80 for silver. With an exchange-traded fund like iShares Silver Trust(NYSEMKT: SLV) or iShares Gold Trust(NYSEMKT: IAU), you can follow gold and silver’s moves at a fraction of the price and without the hassle of trading physical metals.
Both ETFs hold the physical metal and only slightly underperform the assets they track. The silver trust has an expense ratio of 0.5% and is up 132% over the past 12 months, while its gold counterpart has an expense ratio of 0.25% and is up 37% over the same time frame.
I like ETFs because they usually do exactly what it says on the tin. iShares gold and silver trusts are some of the best examples of that, and adding one or both of them to your portfolio is a great bargain hedge against market instability. The gold trust is trading at just shy of $90 per share, and its silver counterpart is trading at $70.
Market instability almost always prompts investors to pile into precious metals, and the wild conditions of the past few years have had the same effect. If you’re worried about the future, an investment in precious metals ought to help you sleep a little easier at night.
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James Hires has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
