Investment Strategy to Profit During Times of Conflict
Jakarta — Escalation of geopolitical tensions in the Middle East involving Iran, the United States, and Israel has now entered an increasingly concerning phase with far-reaching impacts.
These mounting tensions are no longer merely military rhetoric but have triggered real panic in global capital markets, including Indonesia. The emergency closure of stock exchanges in several Gulf nations at the beginning of this week demonstrates how fragile financial stability in the region has become. This dynamic has clearly sparked investor anxiety, given that stock markets are highly sensitive to conflict and security instability.
The pressurised market conditions stem from a series of previous confrontations. Tensions escalated sharply when US forces launched air strikes against several strategic locations in Iran, with Tehran as a major target, resulting in the death of Supreme Leader Ayatollah Khamenei.
This direct involvement by Washington has broadened the situation, with potential ramifications for other major powers such as Russia, China, and European allies being drawn into the Middle Eastern conflict.
In retaliation, Tehran has not remained idle. The Iranian Parliament has approved an option to close the Strait of Hormuz, which serves as a critical artery for global oil distribution, separating Iran and Oman. This strait connects the Persian Gulf to open waters and represents the most critical chokepoint for global energy supply, with approximately 20% of the world’s oil reserves circulating and being exported through it.
For investors, investing amid the shadow of major conflict is undoubtedly a severe challenge. High uncertainty, extreme market volatility, and supply chain disruption threats cause risks to multiply exponentially. Nevertheless, historical precedent shows there are always instruments capable of withstanding or even profiting from crisis situations.
The following is a guide to tactical strategies that can be applied to protect your portfolio amid the uncertainty of conflict:
1. Prioritise Safe-Haven Assets
War creates high uncertainty, so investors must prioritise assets that tend to remain stable or even increase in value during crises. Use hedging instruments to reduce the impact of inflation and volatility:
Gold as a safe-haven asset
US dollars as a safe-haven currency
Treasury Inflation-Protected Securities (TIPS)
Derivatives such as options or futures as asset value protection
2. Focus on Sectors Benefiting from Conflict
Some sectors actually experience increased demand during armed conflict. During war, consumers and governments continue to require certain products and services, making these sectors relatively more stable:
Defence and military sectors, such as weapons manufacturers, military equipment producers, and logistics
Energy sector, including oil, gas, and energy logistics
Essential goods sector, including food, medicines, and basic consumer products
Healthcare sector, such as pharmaceuticals and medical equipment
3. Maintain Cash Reserves
During war, access to liquid cash becomes highly critical. The risk of market closures, asset freezing, or banking system disruptions increases sharply. It is recommended to keep 10–20% of your portfolio in the form of cash or deposits in politically stable countries.
4. Reduce Exposure to High-Risk Assets
During wartime, market volatility will move to extremes. It is strongly recommended to avoid or reduce exposure to speculative assets such as technology stocks, startup investments, property in conflict zones, and stock markets in countries directly involved in war.
5. Monitor Geopolitical Developments and Market Sentiment
Ensure you constantly update information regarding geopolitical developments. News related to military manoeuvres and diplomacy significantly affects commodity prices and stock indices. For example, escalation of conflict in energy-producing regions can absolutely trigger spikes in global oil prices.
Disclaimer: This article is a journalistic product representing CNBC Indonesia Research analysis. This analysis is not intended to encourage readers to buy, hold, or sell related investment products or sectors. All decisions rest entirely with the reader, and we bear no responsibility for any losses or gains resulting from such decisions.