45 Years of Market Shocks

Yesterday's ceasefire rally was real, and we understand why markets reacted the way they did. A 15% single session drop in oil and a surge across every major equity index reflects genuine relief that immediate escalation has been avoided. But markets have a habit of pricing the headline rather than the reality underneath it, and the reality here is that the Strait of Hormuz is still operating under Iranian coordination conditions, tanker insurance has not been reinstated, Gulf producers shut in 7.5 million barrels per day in March alone and physical Brent hit $144 this month, a price never recorded in history. A two week ceasefire negotiated two hours before a unilateral deadline is not the same thing as a resolution, and we think confusing the two is where investors will make their most expensive mistakes over the coming months.

We have been running this analysis against 40 years of MSCI World data, mapping every major crisis against what markets priced in fear versus what fundamentals ultimately delivered. The exercise is humbling every time we do it.

Across all eleven episodes in this chart, from Black Monday in 1987 through the GFC to COVID, the narrative at the trough was always the same. Permanent disruption, structural breakdown, a world that would not return to what it was. It always did. The investors who generated the most wealth across this period were not the ones with the sharpest macro calls. They were the ones who stayed anchored to earnings quality, balance sheet strength and valuation discipline when every headline was telling them to do the opposite.

Our view as of 8 April 2026 runs across three scenarios. In our base case, which we assign a 60% probability, the ceasefire holds and Pakistan mediated negotiations produce a workable framework, Hormuz traffic normalises gradually, oil settles toward $85 - $90 by 3Q26 and the MSCI World recovers toward 4 850 by mid 2027 with global earnings growth of 7% to 9% intact. Our bear case at 25% assumes the window expires without agreement, Iranian conditions on Hormuz transit tighten further, oil holds above $110 to $120 and the MSCI World draws toward 3 400 before finding a fundamental floor sometime in 2028. Our bull case at 15% assumes a permanent agreement emerges faster than expected, oil reverts sharply toward $72 to $75 and the MSCI World breaks above 5 200 before year end 2026.

The 1990 Gulf War is the closest historical analogue we have to today. An oil shock that felt existential, a market that priced in prolonged disruption and an outcome that resolved in eight months and was followed by one of the strongest multi year equity expansions of the modern era. We are not naive about the differences, but the structure of the shock rhymes closely enough to be instructive. Market dislocations of this magnitude historically create compelling entry points for investors with a clear fundamental framework and the patience to act on it. That is the backdrop we are navigating right now.