The U.S.–Iran conflict: How geopolitical shifts are rewriting the investment playbook

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Highlights

• In today’s multipolar world, portfolios should be built with a focus on resilience, energy security and supply-chain redundancy.
• Defence spending has become a structural theme. But discipline is needed to avoid crowded areas of the market.
• Canada's strategic assets are becoming increasingly valuable. The key will be to identify where structural demand aligns with quality assets and attractive economics.

The re-escalation of tensions between the U.S. and Iran is a reminder that we’re investing in a world where geopolitical competition, energy security, supply-chain resilience, defence spending and industrial strategy are becoming permanent market features. The conflict may fade, but the investment regime it reflects will persist.

In a globalized world, investors can treat geopolitical shocks as temporary disruptions. In a multipolar world, those shocks reshape trade routes, capital spending, fiscal priorities, inflation dynamics and portfolio risks.

This is bigger than oil

Oil prices matter, but the larger issue is that energy security is now a strategic priority. Countries are no longer optimizing for the lowest-cost source. They’re optimizing for reliability, redundancy and control. That has implications for infrastructure, utilities, pipelines, power grids, critical minerals and companies that help economies build resilience.

For Canada, this matters. We have strategic advantages in energy, natural resources, critical minerals, infrastructure and trusted trade relationships.

The new keyword is resilience

For decades, globalization rewarded efficiency: long, lean supply chains, just-in-time production and margin expansion. Companies and governments now place a higher value on resilience: diversified suppliers, domestic capacity, allied sourcing, inventory buffers, secure transportation routes and reliable access to energy and raw materials.

That makes onshoring, friend-shoring and near-shoring¹ more than political slogans. They’re capital-spending themes affecting industrial real estate, automation, transportation, power generation, grid modernization, semiconductors, cybersecurity and critical minerals.

Defence spending is now an economic theme

Another feature of a multipolar world is structural defence and security spending. This extends beyond traditional defence contractors to cybersecurity, aerospace, surveillance, logistics, communications networks, dual-use technologies and the broader industrial base supporting national security.

For investors, defence isn’t simply a response to one conflict. It’s part of a longer-term reprioritization of public budgets as governments adapt to a more contested geopolitical environment.

That creates opportunity, but it also creates risk. Themes can become crowded, with too many investors rushing into the same space, driving prices higher and raising the risk of a sell-off. Disciplined investment management means separating durable, cash-flow-supported beneficiaries from companies simply attached to a popular theme.

Portfolio construction has to catch up

The traditional portfolio playbook was built for low inflation, deep globalization, abundant liquidity and relatively stable geopolitical assumptions.

In a multipolar world, diversification must be more deliberate. It’s not enough to diversify by asset class. Investors should also consider diversifying by economic driver, geography, sector exposure, currency sensitivity, inflation sensitivity and supply-chain vulnerability.

That means asking different questions:

• Do we own assets that can benefit from infrastructure renewal, energy resilience and strategic resource demand?
• Are we too dependent on one region, supply chain, currency or macroeconomic regime?
• Do our asset exposures emphasize pricing power, strong balance sheets and durable cash flows?
• Can fixed income still diversify if inflation risk reaccelerates?

Canada has a vital role but selectivity is needed

For Canadian investors, multipolarity is both a risk and an opportunity. Canada’s resource base, energy infrastructure, critical minerals, agricultural capacity, strong financial system and proximity to the U.S. market is becoming more valuable. However, themes are not returns.

The goal is to identify where structural demand meets quality assets, disciplined management and attractive economics.

Bottom line: Don’t trade the headline. Invest for the regime.

The latest conflict escalation may or may not become a lasting market event. But it reinforces a larger reality: we are living in a multipolar world, and portfolios need to be built for that world. That means more attention to resilience, real assets, infrastructure, energy security, supply-chain redundancy, defence and security spending, active management and geographic diversification.

The goal isn’t to react to every geopolitical headline. It’s to recognize that the market environment has changed and portfolio construction needs to evolve with it.

¹ Onshoring, near-shoring and friend-shoring prioritize resilience over optimizing purely for cost. With onshoring, production is moved back to the country where the company or customer is based, strengthening domestic capacity. Near-shoring means relocating operations to countries geographically close to the primary market, often with favourable trade agreements. Friend-shoring is sourcing from allies or countries with close relationships.

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