{"id":1044,"date":"2026-03-11T17:11:44","date_gmt":"2026-03-11T17:11:44","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/blairadrianwealthadvisory\/?p=1044"},"modified":"2026-03-11T17:11:44","modified_gmt":"2026-03-11T17:11:44","slug":"geopolitics-oil-prices-and-market-volatility","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/blairadrianwealthadvisory\/2026\/03\/11\/geopolitics-oil-prices-and-market-volatility\/","title":{"rendered":"Geopolitics, Oil Prices, and Market Volatility"},"content":{"rendered":"

Geopolitics, Oil Prices, and Market Volatility<\/strong><\/p>\n

Only three weeks ago, markets were enjoying what many commentators described as a \u201cGoldilocks\u201d environment. Interest rates were trending downward, corporate earnings were rising, and the U.S. dollar remained stable. Importantly, none of these fundamental drivers have materially changed.<\/p>\n

However, recent geopolitical developments have introduced a degree of volatility into financial markets.<\/p>\n

Following U.S. strikes against Iran roughly ten days ago, oil prices rose sharply amid concerns about a potential disruption to global energy supplies. The Strait of Hormuz\u2014through which approximately one-fifth of the world\u2019s oil supply flows\u2014has become the focal point of investor attention. Any threat to this vital shipping route naturally reverberates through energy markets and global equities.<\/p>\n

While the situation remains fluid, financial markets appear to be signaling that investors expect the disruption to be temporary rather than structural.\u00a0<\/strong><\/p>\n

Market Reaction So Far<\/strong><\/p>\n

Let us examine what the markets are actually telling us.<\/p>\n

Since February 27\u2014the day before the U.S. strike on Iran\u2014the S&P 500 has declined approximately 2.5%, falling from 6,878 to about 6,710 as of March 9<\/strong>. In historical terms, this represents a modest pullback rather than a meaningful correction.<\/p>\n

Energy markets experienced a sharper reaction. West Texas Intermediate (WTI) crude oil briefly surged to approximately US$119 per barrel<\/strong>, reflecting immediate concerns about supply disruptions. Since then, prices have retraced to roughly US$95 per barrel<\/strong>.<\/p>\n

Perhaps more telling is the signal coming from the futures market. The nine-month WTI futures contract is currently trading near US$70 per barrel<\/strong>, suggesting that market participants expect the current price spike to be temporary.<\/p>\n

In other words, while geopolitical tensions have created short-term uncertainty, the market consensus appears to be that oil supply disruptions will ultimately prove manageable.<\/p>\n

Historical Perspective<\/strong><\/p>\n

In terms of geopolitical shocks in general, history is remarkably consistent:\u00a0 when you line up major geopolitical events, from Pearl Harbor to the start of the Russia-Ukraine War, and look at the subsequent 12 months, average stock market returns are right around their long-term trend of around 8%.<\/p>\n

\"Stock<\/p>\n

Periods of geopolitical tension in the Middle East have historically produced similar patterns in energy markets as what we are witnessing.<\/p>\n

A useful historical comparison is the Gulf War of 1990\u20131991<\/strong>. Prior to Iraq\u2019s invasion of Kuwait in July 1990, oil prices were roughly US$20 per barrel<\/strong>. Following the invasion, fears of supply disruption drove prices sharply higher, briefly doubling to approximately US$40 per barrel<\/strong>.<\/p>\n

However, once the conflict stabilized and supply concerns eased, oil prices declined rapidly. By early 1991, oil had fallen back toward US$22 per barrel<\/strong>, close to pre-invasion levels.<\/p>\n

The lesson is not that every geopolitical shock resolves quickly, but rather that oil markets often react sharply in the short term and normalize once supply risks become clearer<\/strong>.\u00a0 We are of the opinion that now is the time to lighten up on energy holdings for those who may have them.\u00a0 We will be contacting those of you to whom this applies.<\/p>\n

Implications for Canada<\/strong><\/p>\n

For Canada, elevated oil prices have an additional dimension.<\/p>\n

Over the past decade, technological improvements and operational efficiencies have significantly reduced the break-even costs for Canadian oil sands producers. Today, the industry\u2019s average break-even cost is generally estimated to be in the low-to-mid US$40 per barrel range<\/strong>.<\/p>\n

For example:<\/p>\n