QatarEnergy's liquefied natural gas production facilities in Ras Laffan Industrial City, Qatar, on March 2. Qatar has halted all LNG exports.Stringer/Reuters
Sam Sivarajan is a keynote speaker, independent wealth management consultant and author of three books on investing and decision-making.
There is an old saying in investing: The biggest risks are not the ones that appear suddenly, but the ones that have been building quietly for decades – until one event makes them impossible to ignore. The events of the past week may be just such a moment.
On Saturday, Feb. 28, U.S. and Israeli strikes on Iran triggered a military response that sent immediate shockwaves through global energy and financial markets. The Strait of Hormuz became the most consequential chokepoint on earth practically overnight. With the Strait effectively closed to shipping and Gulf energy producers from Iraq to Kuwait cutting output because tankers will not transit the waterway, analysts at Barclays and UBS have warned oil prices could test US$120 to US$135 if disruptions persist.
Qatar has halted all LNG exports. U.S. gasoline prices jumped from roughly US$3 a gallon to US$3.45 in a single week, with a US$4 national average forecast this week. As one energy economist put it, halting oil flows through the strait is comparable to blocking the aorta of the global circulatory system.
The instinct of most investors and business leaders was to focus on the immediate numbers – and initially, equity markets seemed to shrug. The S&P 500 finished the Monday after the attacks nearly flat, as investors bought the dip in technology stocks. That composure did not last. By the end of last week, the Dow had posted its worst weekly decline since April, falling more than 3 per cent. The S&P 500 sank 2 per cent, its worst week since October. On Friday alone, the Dow dropped 453 points after oil topped US$90 a barrel and a weak U.S. jobs report added stagflation fears to an already anxious market.
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Historically, geopolitical shocks always show a familiar pattern: fear-driven selling, followed by gradual stabilization as markets assess the full scope of disruption. Carson Group analysis of 40 major geopolitical events over 85 years found the S&P 500 lost on average just 0.9 per cent in the first month after a crisis, then gained 3.4 per cent over the following six months.
But that pattern assumed the underlying financial architecture – centred on the U.S. dollar – remained intact. It also assumed disruptions lasting weeks, not months. With the Strait at a near-total halt and ExxonMobil’s chief economist warning that prolonged closure is now the more probable scenario, those historical averages may offer false comfort. That assumption deserves serious scrutiny.
Since the early 1970s, oil has been priced in U.S. dollars, and oil-exporting countries recycled their surpluses into U.S. Treasury bonds and American equities. This petrodollar arrangement gave the United States a remarkable structural advantage: lower borrowing costs, stronger global demand for its currency, and the ability to sustain fiscal deficits that would cripple any other country. Economists estimate this “exorbitant privilege” is worth roughly US$225-billion to US$270-billion annually to the American economy.
That system is now under quiet but measurable pressure – and this conflict in the Middle East has accelerated the timeline considerably.
Gulf states – long anchored to the American security umbrella – absorbed Iranian missile strikes as part of the retaliation against U.S.-Israeli attacks. When the security arrangement you have relied upon for decades fails to fully protect you, the financial arrangement tied to it becomes subject to renegotiation. The implicit contract underpinning petrodollar recycling is being reassessed in Riyadh, Abu Dhabi and Doha in real time.
What makes this particularly consequential is a dynamic that rarely gets discussed: the structure of Gulf sovereign wealth funds. Saudi Arabia’s PIF, the Abu Dhabi Investment Authority and the Qatar Investment Authority collectively manage well over $2-trillion in global assets. A significant portion sits in illiquid investments – private equity, infrastructure and real assets that cannot be sold quickly. When cash-flow demands arise, every dollar that must be raised comes from their liquid sleeve: publicly traded U.S. equities and Treasuries. Illiquidity does not dampen the selling pressure. It concentrates and accelerates it, directed precisely at the assets underpinning American market valuations.
Meanwhile, the infrastructure for a post-dollar world is no longer theoretical. Approximately 92 per cent of trade between Russia and China now settles in rubles and yuan, bypassing the dollar entirely. Project mBridge – a digital payments platform developed by the central banks of China, the UAE, Thailand and Hong Kong – has settled more than US$55-billion in cross-border transactions without touching SWIFT, the Western banking system that has long handled the vast majority of international payments. Saudi Arabia joined the mBridge project in 2024. Late in 2025, China issued a sovereign bond that was oversubscribed 30 times, with yields barely above equivalent U.S. Treasuries – a quiet but unmistakable signal that markets are beginning to reprice the traditional safe-haven premium on American debt.
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None of this means the dollar is about to collapse. It still represents roughly 58 per cent of global foreign exchange reserves, and no credible single alternative exists. But the relevant question is not whether the dollar gets replaced – it is what happens to financial and strategic assumptions if dollar dominance gradually erodes. Higher U.S. borrowing costs, commodity price volatility and more fragile supply chains are plausible downstream consequences. For business leaders, that means supply chain exposure, energy cost assumptions and treasury hedging strategies all warrant a fresh look.
Three grounded steps are worth taking now.
First, resist the urge to react to daily price moves – even dramatic ones. The first Monday of the war, the S&P 500 finished nearly flat as investors bought the dip. Those who sold in panic at the open locked in losses; those who bought impulsively are now underwater as the sustained disruption became clearer. As behavioural finance research consistently shows, the investors who fare worst in volatile periods are those who confuse short-term noise for long-term signals. Missing just the 10 best days in the stock market over a 20-year period can cut overall returns by half. The oil price surge is real and consequential but reacting to every daily headline is not a strategy. Staying anchored to a long-term plan is.
Second, audit your energy and inflation assumptions. Most portfolios and business plans built over the past decade assumed stable, low energy costs. If elevated prices persist – whether from this conflict or the broader structural shifts in Gulf geopolitics – inflation may prove stickier than central banks anticipate. It is worth stress-testing whether your holdings, contracts and cost structures can absorb that scenario.
Third, revisit concentration. Portfolios heavily weighted toward rate-sensitive assets or technology stocks face a different risk environment in a world of persistent inflation and eroding petrodollar recycling. The same logic applies to business leaders with concentrated exposure to Gulf markets or dollar-denominated supply chains. Rebalancing is not a market call. It is basic maintenance – the financial equivalent of a controlled burn before conditions become unmanageable.
Is your portfolio – or your organization’s strategy – still built for the financial assumptions of the past? Or is it positioned for a world in which those assumptions are being quietly, but irreversibly, renegotiated?
The world is not ending, but it is changing. And the pace of that change is accelerating. Preparing for a more multipolar, more contested financial world is not pessimism. It is prudence.
As the economist John Maynard Keynes once observed, “The difficulty lies not so much in developing new ideas as in escaping from old ones.” For investors and leaders anchored to a world that may already be receding, that escape may now be the most important strategic decision of the next decade.
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