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Or sign-in if you have an account.The question for investors is clear: how will they adjust their portfolios now that the world order has clearly been realigned? Photo by Mia/Adobe StockThe international economic pain that has been inflicted by United States President Donald Trump in the form of both tariffs and a Middle Eastern war could become far more acute. Pain and relief have waxed and waned for 18 months as markets have tried to digest Trump’s on-again, off-again threats and retreats. But as the economic stress piles up, that pain may grow more severe than many of us could have imagined.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorAs Iran demonstrates its ability to spike inflation and slow global trade and energy flows through a prolonged closure of the Strait of Hormuz, we face a potential crisis that markets don’t seem to be pricing in. Investors, however, should be on their toes and consider readjusting their portfolios in preparation.Canada's best source for investing news, analysis and insight.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Investor will soon be in your inbox.We encountered an issue signing you up. Please try againCapital markets react swiftly to news. In the spring of 2025, when Trump announced his “liberation day” tariffs, markets dropped precipitously. Mere days later, he backed off and markets rebounded. That’s the thing about market efficiency: It reacts quickly and accurately to things that are obvious. However, when the consensus is not overwhelming, the market frequently continues as it has. Geopolitical experts such as Robert Pape at the University of Chicago have spent months warning anyone who would listen that the U.S. lost control of the war against Iran in the early weeks and has been struggling to justify its ongoing involvement ever since. As the Americans continued to press forward after their failure to topple the regime the Iranians gained control of the Strait of Hormuz and with it, a dominant political position in the Middle East.We have a transactional American President who tends to see the world using a binary win/lose paradigm. What the world is now dealing with is a clear lose/lose paradigm. The Iranians have lost ground militarily, and their citizens are clearly suffering. And they have no qualms about making the rest of the world suffer. As a result, the Iranians have leveraged their grip on the Straight of Hormuz to choke off energy and other exports. With Iranian allies also threatening an alternate Red Sea corridor it seems more likely that we will be facing an exacerbated energy and economic crisis, even with the current optimism that a U.S.-Iran agreement could be reached soon.The question for investors is clear. Even though capital markets were slow to recognize the fact that Iran has become a dominant political player in the Middle East, how will they adjust their portfolios now that the world order has clearly been realigned?For starters, the price of oil is likely to be extremely high for the foreseeable future. Unfortunately, however, oil companies and oil exchange-traded funds are rated as medium- to high-risk investments, so they are not suitable for a large portion of the population. One way around this challenge is to use broad commodity ETFs, which are frequently rated as medium risk. You’ll at least get some exposure to oil and more diversification, to boot.The other change that is likely to manifest is that inflation will likely spike higher, and with a vengeance. Supply chains will continue to be disrupted. Factor inputs, or resources, will likely grow more expensive and almost everything will likely cost more.As a result, investors should give serious consideration to increasing their allocation to hard assets. This includes precious metals, resources and infrastructure. Depending on your time horizon, investment real estate (REITs) might also merit some consideration.Stock markets are likely to be volatile, and rate hikes are possible as well, so it seems entirely possible the world will be dealing with a severe bout of stagflation, where the economy stagnates while prices skyrocket. Both stocks and bonds may suffer in that environment.Investors can consider alternative investment products that are not correlated to the stock or bond markets. It will likely be a good time to think out of the box. If you haven’t already done so, you might want to consider market neutral products, long/short products or liquid alternatives. While these are generally limited to accredited investors, retail investors can access them through alternative mutual funds and ETFs. Specialty products that invest in non-correlated, cash flowing investments such as music royalties can also be of use to accredited investors. However investors should be aware of the liquidity and risk profile of some of these investments.Depending on whom you talk to, there is a consensus that the world has been changing rapidly. The peace dividend ended in February 2022 when Russian President Vladimir Putin invaded Ukraine. Globalization ended resoundingly in April 2025 when Trump attacked former allies with across-the-board tariffs, the likes of which had not been seen in almost 100 years. August of 2026 will likely go down in history as the point where the geopolitical balance of power shifted, and with it the global economic order. People don’t want to hear this, but we all need to accept that Iran has emerged as a dominant political player in the Middle East and that that change will have a major impact on the way the global economy evolves.You should look at adjusting your portfolio with that in mind.John De Goey is a portfolio manager with Designed Securities Ltd., regulated by the Canadian Investment Regulatory Organization and a member of the Canadian Investor Protection Fund. Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.