Portfolio Management in Times of War Vulnerability: Lessons for Resilient Investing
Blog Geopolitical conflicts don’t just disrupt borders—they shake portfolios. From gold surging past $5,200/oz during the Iran–US confrontation to energy stocks rallying +33% amid supply shocks, wars redefine safe havens and tactical winners. This post explores resilient investing strategies: pairing gold and defence equities with short-duration funds, maintaining liquidity buffers, and diversifying away from conflict zones. The key lesson—resilience lies in anticipating shocks, exploiting tactical gains, and preserving long-term value.post description.
Ajay Srivastava , Founder Arth Advisory
8/18/20262 min read
Portfolio Management in Times of War Vulnerability: Lessons for Resilient Investing
Introduction
Geopolitical conflicts are not just political crises—they are systemic shocks that ripple across capital markets. The Iran–US confrontation in 2026 and the Russia–Ukraine war in 2022 show how wars reshape correlations: gold surges as a safe haven, energy equities rally on supply shocks, while traditional assets like fixed deposits and real estate struggle to preserve real value.
For investors, the challenge is not only diversification but geopolitical resilience—designing portfolios that anticipate war-driven shocks, exploit tactical gains, and preserve long-term value.
Market Lessons from Recent Conflicts
Gold: In March 2026, amid Iran–US strikes, gold surged to $5,050–5,200/oz, with J.P. Morgan projecting $6,300/oz by year end. Central banks are expected to buy 800 tonnes in 2026, reinforcing gold’s role as a hedge.
Energy Stocks: The S&P Energy Index gained +33% YTD (2026), driven by the Strait of Hormuz closure.
Russia–Ukraine War: Gold rose 12% in Q1 2022, while energy equities rallied on oil/gas shortages. MSCI EM Europe collapsed, highlighting regional vulnerability.
Defence Equities: US defense spending expanded to $1.01 trillion, creating structural gains for defense stocks.
Asset Class Comparison in Wartime
Asset Class
Performance in Conflict
Strengths
Weaknesses
New Perspective: Short Duration & Overnight Funds
Short Duration Funds
Deliver 6–8% returns with resilience in rising interest rate environments.
Outperform longer-duration bonds during wartime inflation spikes.
Example: ICICI Prudential Short Term Fund delivered 6.7% 1Y return and 7.35% 5Y CAGR.
Overnight Funds
Invest only in one-day maturity instruments (TREPS, repos), eliminating duration and credit risk.
NAV moves in a straight line—ideal for emergency liquidity buffers.
During COVID-19 stress (2020), overnight funds were insulated from volatility that hit liquid funds.
Strategic Implications
Barbell Portfolio: Pair gold + defence equities with energy stocks + short-duration debt funds.
Liquidity Buffer: Maintain 10–15% in overnight funds or FDs for redeployment.
Geographic Diversification: Underweight conflict zones, overweight neutral economies (SE Asia, Latin America).
Dynamic Hedging: Use currency and commodity futures to manage volatility.
Debt Allocation: Prefer short-duration and overnight funds over long-duration bonds in wartime inflationary environments.
Conclusion
War vulnerability is not an anomaly—it is a recurring structural risk. The Iran–US and Russia–Ukraine conflicts show that gold and defence stocks are structural hedges, energy equities are tactical winners, while short-duration and overnight funds provide stability and liquidity. Duration of disruption—short vs sustained—determines whether portfolios recover quickly or face prolonged stress.For investors, resilience means anticipating shocks, exploiting tactical gains, and preserving long-term value.
