What Iran Is Really Testing

As I write this, Brent crude is trading above $112 a barrel. The Strait of Hormuz — the narrow passage through which roughly a fifth of the world’s oil supply flows — has been effectively closed for most of March. The IEA has coordinated the largest emergency release of strategic oil reserves in history. Analysts at Yahoo Finance are calling it the worst oil shock ever recorded. The S&P 500 has shed over four percent in three weeks, and the news cycle is a wall of fire, literally and figuratively.

If you have money in the markets right now, you are feeling something. Fear, probably. The urge to do something. The compulsion to check your portfolio, read one more analysis, scroll one more headline, find someone — anyone — who sounds like they know what happens next.

I want to talk about that feeling. Because what Iran is really testing is not your portfolio. It is testing your process.

The Pattern Everyone Forgets

Geopolitical crises have a remarkably consistent effect on investors: they make us forget everything we know.

We forget that the Gulf War of 1990 saw the S&P 500 drop over thirteen percent in three months — and then finish the following year more than ten percent higher than the day Iraq invaded Kuwait. We forget that when trading resumed after September 11th, the market fell eleven percent in a week and recovered within a month. We forget that when Russia invaded Ukraine in 2022, the S&P declined just seven percent and absorbed the shock within weeks.

The data across more than two dozen major geopolitical events since World War II tells a story that is almost boring in its consistency. The average decline is roughly five percent. The average recovery takes less than forty days. Markets bottom in about three weeks and are back to where they started in under two months.

It would be comforting to stop there. To say: don’t worry, this too shall pass, sit tight and everything will be fine.

But that would be dishonest. Because there is one major exception to this pattern, and it is the one that matters most right now.

1973

In October 1973, the Organisation of Arab Petroleum Exporting Countries imposed an oil embargo against nations that had supported Israel during the Yom Kippur War. Oil prices quadrupled — from roughly $3 a barrel to nearly $12. What followed was not a swift recovery. The Dow Jones Industrial Average fell forty-five percent from its 1973 peak to its trough in December 1974. Inflation hit double digits. The word “stagflation” entered common usage. The bear market lasted nearly two years.

The 1973 crisis was different because it was not merely a geopolitical shock. It was an energy shock that rewired the economy. It changed the cost structure of everything — transport, manufacturing, food, heating — and it did so during a period when inflation was already running hot. The market did not shrug it off in forty days because the damage was structural, not sentimental.

I suspect you can see why I am raising this now.

The Uncomfortable Parallel

The comparisons between 1973 and what is happening in Iran today are not subtle. Marketplace has reported that the shock to the global oil market is roughly three times larger than the 1970s crisis. Nearly eighteen million barrels per day of oil flow through the Strait of Hormuz have been disrupted — compared to four and a half million barrels per day lost in 1973. The mechanism is different — a choke point closure rather than a production embargo — but the effect is the same: a sudden, massive contraction in global energy supply.

There are differences, and they matter. The world is less oil-intensive per unit of GDP than it was in 1973. Strategic petroleum reserves exist now precisely because of what happened then. The IEA has already released four hundred million barrels to cushion the blow. Renewable energy capacity means total dependence on Gulf oil is lower than it was half a century ago.

But there are also echoes that should make any thoughtful person pause. Inflation was already a concern before the first missile landed. Supply chains had not fully recovered from years of disruption. And the political will to absorb economic pain in exchange for geopolitical objectives is, in 2026, at least as strong as it was in 1973.

Nobody knows how this ends. That sentence is not a disclaimer. It is the entire point.

The Two Types of Investor

In every crisis, two types of investor emerge. The distinction between them has nothing to do with intelligence, access to information, or market experience. It has everything to do with whether they had a process before the crisis began.

The first type is reacting. They are watching the oil price. They are reading Goldman Sachs research notes and trying to determine whether Hormuz will reopen in one week or three. They are debating whether this is 1973 again or just another geopolitical blip that recovers in forty days. They are, in essence, trying to predict the future — and they are making investment decisions based on those predictions.

The second type is following their rules. They had a position-sizing framework before Iran, and they are applying it now. They had risk limits before Hormuz closed, and those limits are doing their job. They are not trying to figure out what happens next, because their process already accounts for not knowing what happens next. The committee was set before the crisis. The rules do not change because the headlines changed.

Benjamin Graham described the market as a manic-depressive business partner — Mr. Market — who shows up every day offering to buy your shares or sell you his, at wildly varying prices driven by his emotional state. Your job, Graham said, is not to follow Mr. Market’s moods. Your job is to exploit his irrationality or ignore it entirely.

Right now, Mr. Market is having one of his episodes. The question is whether you are following him or following your process.

What a Process Actually Looks Like in a Crisis

A process is not a feeling. It is not “I believe in the long term” or “I know markets always come back.” Those are sentiments, and sentiments collapse under pressure.

A process is a set of rules you wrote when you were calm, designed to govern your behaviour when you are not.

It means your position sizes were set before the crisis, so no single holding can damage you beyond a predetermined threshold. It means your entry criteria have not changed because oil hit $120 — if the rules say a stock meets your standards, you follow the rules. If they say it does not, you follow the rules. It means your exit criteria are mechanical, not emotional — you sell when the process says to sell, not when CNN says to panic.

“You can’t predict. You can prepare.”
— Howard Marks

The difference between those two words is the difference between anxiety and discipline. Prediction is a guessing game. Preparation is a system. One of them fails exactly when you need it most. The other works precisely because you built it in advance.

The Hardest Part

I will not pretend this is easy. The hardest part of process-driven investing is not building the process. It is following it when every fibre of your being is telling you the process is wrong.

When oil is above $100, when the Strait of Hormuz is closed, when serious people are comparing this to the worst economic shock in half a century — the process feels inadequate. Surely this time is different. Surely the rules need to be overridden. Surely you should do something.

This is the moment the process exists for.

“It was never my thinking that made the big money for me. It always was my sitting.”
— Jesse Livermore

Sitting — doing nothing — when every instinct is screaming at you to act. That is the discipline that separates investors who compound wealth from investors who destroy it.

Warren Buffett invested five billion dollars in Goldman Sachs in the depths of the 2008 financial crisis. Not because he predicted the recovery. Because his process — decades of disciplined value investing — told him the price was right relative to the value. He followed the rules when everyone else was following their fear.

This Is What The Money Program Is Built For

I built The Money Program because I spent decades watching intelligent people make avoidable mistakes with their capital. Not because they lacked information. Not because they were unintelligent. Because they had no process, and when the pressure came, they had nothing to fall back on except instinct.

The AI committee at the heart of The Money Program does not watch the news. It does not have opinions about Iran. It does not feel anxiety about oil prices. It applies the collected wisdom of the greatest investors in history — their rules, their frameworks, their hard-won discipline — to every decision, regardless of what the headlines say.

That is not because the news does not matter. It is because the process already accounts for it. Position sizing accounts for it. Risk management accounts for it. The margin of safety accounts for it. The rules were written for exactly this kind of moment — and they do not bend because the moment arrived.

The Question That Matters

Iran may resolve quickly. Oil may fall back below $80, the Strait may reopen, and in six months this will be another data point on a chart showing that geopolitical crises are temporary market disruptions.

Or it may not. This may be 1973 again — a structural energy shock that reshapes the economic landscape for years. The parallels are real enough that anyone who dismisses them is not paying attention.

I do not know which outcome we are heading toward. Neither does anyone else, regardless of what they claim on television or in a research note.

But here is what I do know: the investors who come through this well will not be the ones who predicted the outcome correctly. They will be the ones who had a process that worked regardless of the outcome.

That is not a comforting answer. It is not exciting. It does not make for a compelling TikTok video or a breathless newsletter subject line.

But it is true. And in the end, the true things are the only things that compound.

The Money Program: Process over prediction. Discipline over activity. Compounding over excitement.

For educational and informational purposes only. Nothing on this site constitutes financial advice. Past performance is not indicative of future results.

Mark Sear
Founder, The Money Program