By Shayan Heidari, portfolio manager at Finserve Global Security fund
I have not been back to Iran since 2004. I was 10 years old when we left, and my father and much of my family still live there. That does not make me a geopolitical expert. But it changes what I pay attention to. And, right now, I think markets are looking in the wrong place.
When conflict erupts, defence equities start to move before the analysis catches up. In the short term, conflict drives orders. In the long term, it reshapes entire procurement systems. Markets have been slow to price that distinction, and the gap between what is being bought today and what will be needed over the next decade is where the real investment case sits. Those are very different investments, and in the noise of the first weeks, they tend to move together. The US and Israeli strikes on Iran were no exception. What is happening is more structural and more complicated than the first reactions suggest.
Insurance costs for a single oil tanker transiting the Strait of Hormuz reportedly rose to several million dollars per trip. That spike revealed something energy planners have long understood, but markets had largely priced away: the global energy system rests on a handful of chokepoints and keeping them open requires continuous political and military effort. No formal closure was needed. Shipowners anchored, recalculated and rerouted. Within days, a narrow stretch of water between Iran and Oman led to price hikes at fuel pumps across the world.
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The shock exposed a deeper fragility in the global economy. Higher input costs feed inflation, capital pulls back, and the response, more resilient supply chains and defended infrastructure, is a multi-year investment shift already underway.
When Qatar lost close to a fifth of its gas export capacity overnight, it broke a comfortable assumption that Gulf states had spent years quietly relying on: that hosting Western military bases, maintaining careful neutrality and sitting on vast sovereign wealth funds was enough to insulate an economy from the conflicts burning on its doorstep.
The decline in US-focused defence ETFs exposed a mispricing. The market overweights immediate consumption and underprices long-term capability. Ammunition is consumed but systems are accumulated, and that is where the structural demand lives.
When Korean manufacturers producing interceptor missiles and ammunition found their equities moving sharply higher in the first days of the conflict, it confirmed demand is no longer local. It is global. The relevant supply chains now run through Seoul, Tokyo, Stockholm and London.
If Hormuz is a warning, Taiwan is the real stress test
When the Strait of Hormuz demonstrated that a single chokepoint under limited pressure can effectively halt a significant share of global energy trade, it raised a question I find myself returning to repeatedly: what would the same scenario look like in other places, such as the Strait of Taiwan? The strait is narrower, the economic stakes considerably larger, and the military complexity of any confrontation there far greater. Probably every defence ministry in Asia is running that calculation right now, and the procurement decisions that follow will surface in order books over the coming years.
There are constraints in this environment worth watching. When an entire sector re-rates simultaneously, valuation becomes the discipline that separates good investments from expensive ones, and much of the structural demand is already reflected in prices across Europe, the US and Asia. The margin for error has narrowed, making stock selection more important than before. At the same time, the constraint is political as much as financial. Feeling the pressure of a crisis is one thing, converting it into long-term contracts is another, and history suggests that follow-through is always the harder part.
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Against that backdrop, we have kept the portfolio close to fully invested throughout, around 98% deployed. In a period of extraordinary volatility, that is a deliberate choice. We are convinced that the structural case remains intact even when the short-term picture is unclear, and that trying to time an exit and re-entry in a market moving this fast carries obvious risks.
Removing senior leadership does not guarantee regime change, but it shifts the internal calculus. The probability of structural change in Iran is higher than in years and whatever emerges will reshape the regional security landscape.
The Iranian people I know, both those still in Tehran and those in exile, are cautiously hopeful rather than triumphant. Tens of thousands were killed during peaceful protests in recent years, people who asked for nothing more than a future with jobs, dignity and more freedom. That stays with me in every conversation about what is happening now. My hope is that the price paid by ordinary Iranians might finally mean something.
When geopolitical risk shifts from episodic to structural, the investment landscape changes with it. Energy vulnerability becomes permanent. Defence spending becomes embedded. Political consensus hardens across regions. The big shift will outlast any single conflict.
It is clear the conflict unfolding now will have long-term implications for the global security landscape and defence priorities for years to come. In markets like this, the investors who endure are rarely those who move fastest. More often, they are the ones who understand the structure early, build accordingly, and remain disciplined enough to act when the moment requires it and patient enough to hold when it does not.
