Every time there is a geopolitical conflict, institutional funds follow the same path.

Author: Felix Prehn 🐶

Compiled by: Deep Tide TechFlow

Deep Tide Guide: The author is a former investment banker. The value of this article isn’t in predicting the conflict’s direction but in breaking down a three-phase institutional capital flow model that spans the Gulf War, Iraq War, and Russia-Ukraine War. Retail investors losing money during conflicts is almost a systemic error. This article points out the specific reasons and strategies, with a much clearer logic than emotion-driven analysis.

The full text is as follows:

There is a flood of news about the US and Iran right now.

If you’re wondering whether you can make money from this conflict — the answer is yes. Let me tell you exactly how.

I’ve worked in investment banking for many years, specializing in finding what Wall Street coldly calls “event-driven opportunities.” That’s their sophisticated way of describing war. In every major war — Gulf War, Iraq War, Russia-Ukraine War — a consistent three-stage market pattern appears, determining where institutional funds will flow next.

Stage One: Shock — retail panic selling.
Stage Two: Repricing — market calms and reassesses.
Stage Three: Rotation — institutional capital flows into new sectors.

The US-Iran conflict is following the same pattern now. The shock phase has already begun. What will happen next, where the real money is flowing — as long as you know what to watch for — can be predicted.

That’s what I’m here to share with you.

How retail investors do vs. how institutions do

When conflict erupts, retail investors typically do one of three things:

• Convert everything into cash — thinking it’s safety, but actually just ensuring their money is eroded by inflation.
• Freeze — staring at red, unable to move, doing nothing.
• Chase the recent surge — buying oil, defense stocks, gold at the absolute wrong time, driven by fear and without a plan.

Meanwhile, institutions managing billions of dollars aren’t doing any of these. They are repositioning based on decades of research into conflict patterns. Not emotion — rules.

Let me teach you the same.

Recurring Patterns

In the first 10 days after a geopolitical conflict erupts, the S&P 500 typically drops 5% to 7%. About 35 days later, it stabilizes. After 12 months, it tends to rise 8% to 10% — roughly the average performance in any normal year.

Real historical examples:

• During the Gulf War, the S&P had an annualized return of 11.7%. After the war ended, it rose 18% over the next 12 months.
• During the 2003 Iraq War, the market rose 13.6% in three months.
• During the 2022 Russia-Ukraine War, the S&P initially fell 7%, then rebounded above pre-invasion levels within a few months.

Wars rarely destroy markets. They create uncertainty, and uncertainty causes declines. Declines create opportunities.

Why Iran is especially important

Iran produces 3.3 million barrels of oil daily.

Any escalation — even perceived escalation — increases supply risk, which affects everything.

Markets don’t wait for actual supply disruptions; they price in the risk in advance. Traders assume some oil might stop production, meaning supply could decrease while demand stays the same, pushing oil prices higher. Oil is an input for nearly everything — transportation, manufacturing, shipping, food production, fertilizers, heating, cooling.

Rising oil prices mean rising costs across the board. Higher oil prices lead to higher inflation. Higher inflation might keep the Fed from cutting rates. Higher rates mean more expensive mortgages, car loans, and corporate borrowing. More expensive borrowing means lower corporate profits. Lower profits mean lower stock valuations.

The three stages of each conflict

Every geopolitical conflict drives capital through three distinct stages. Understanding which stage you’re in can completely change what you should do.

Stage One: Shock.

This stage is fast, fierce, driven by emotion and algorithms. Oil surges. The VIX — the market fear index — skyrockets. Risk stocks plummet. Biotech, high-growth tech, speculative assets — as funds rush into safe havens — all get sold off. Gold rises. Financial media enters 24-hour rolling coverage, designed to maximize fear.

This stage lasts days, sometimes weeks. If you buy oil, gold, or defense stocks during this phase, you’re almost certainly buying at the top. Emotional impulses peak here, which is why acting at this moment is the most costly mistake.

Stage Two: Repricing.

Panic subsides. The market begins to think rather than feel.

The question shifts from “What happened?” to “What’s next?” Is this temporary or structural? Will inflation stay high? What will the Fed do? Are supply chain disruptions permanent or just temporary?

This is when institutions start repositioning. Not during the chaos of the first days — but in the subsequent clarity. This is where smart money makes money. In the calm after the storm, not during it.

Stage Three: Rotation.

Funds flow out of impacted sectors and into those benefiting from the new reality.

Where the money actually flows

First: Energy — but not in the way you might think.

The obvious play is oil — and indeed, oil outperforms in the short term. A Bank of America study on the 1990 geopolitical shock shows oil was the best-performing asset, averaging an 18% rise. You want to hold companies that benefit from sustained high oil prices: pipeline companies, storage terminals, energy infrastructure — those that can charge tolls regardless of oil price direction.

Second: Defense — but focus on structural rather than headline plays.

Yes, defense stocks spike immediately. Some have risen over 30% since tensions escalated. But defense spending isn’t a one-quarter event. Governments sign 10-year procurement contracts. Large contractors have backlog orders worth hundreds of billions. Focus on companies with long-term expenditure cycles.

Third: Gold and silver — for longer-term positioning.

Gold surges in the first stage, but unlike oil, it often stays high. Bank of America data shows that six months after a shock, gold continues to outperform by an average of 19%. The drivers — higher inflation, central bank money printing, institutional safe-haven demand — don’t disappear after headlines fade. If the conflict drags on, oil remains high, and inflation stays sticky, the Fed can’t cut rates. That environment is gold’s strongest.

Fourth: Companies with pricing power.

This is a point most miss. If inflation remains high long-term, you want companies that can pass higher costs onto customers without losing sales. Strong brands. High margins. Companies with no cheaper alternatives for their customers.

Which sectors get hurt: Utilities and real estate usually underperform during these periods. Longer-term high rates compress valuations in these sectors. If you’re overweight in these areas, reconsider your positions.

What you should actually do

Don’t panic sell. Decades of conflict data are clear — selling during the initial shock locks in losses and guarantees you miss the rebound. Don’t chase what’s already surged. If it’s already on financial media, you’re late. Don’t watch war coverage.

Keep your core portfolio intact — high-quality companies with strong brands, high margins, and pricing power.

Then review your holdings. Ask two questions:

• Which are most vulnerable in this environment?
• Where is institutional money flowing that I haven’t yet captured?

What you’re doing is tilting your portfolio — selectively repositioning into sectors where institutions are already moving, before the headlines catch up.

This is about your livelihood. Your retirement. Your family’s financial security.

Manage risk properly, and you can profit. That’s the least exciting thing I can say — but it’s the truth.