Oil markets

have experienced sharp and often disorienting swings since the war in the Middle East started just over a month ago. Prices surged as tensions escalated into a shutdown of the Strait of Hormuz, a chokepoint that handles a meaningful share of global oil flows. Prices then partially reversed just as quickly on even the smallest hint of de‑escalation or a possible ceasefire. The result has been a market driven less by steady analysis and more by a speculation of outcomes and rapidly shifting probabilities that can change overnight.

This environment has proven fertile ground for strong opinions. Many commentators have framed the situation in absolute terms, arguing that

oil prices

must rise sharply and remain elevated because a reopening of the Strait of Hormuz appears unlikely. That framing has encouraged aggressive positioning in

energy stocks

at moments when fear was already elevated and expectations have become one‑sided.

That approach has been costly for investors who treated the situation as a one‑way

trade

and got the timing wrong. Investors who entered positions late, convinced prices could only move higher, found themselves exposed to swift drawdowns. Over the years, I’ve learned that markets are rarely kind to trades that feel obvious.

This does not diminish the seriousness of the situation. A sustained disruption in the Strait of Hormuz would represent one of the most consequential oil supply interruptions in modern history. The global economy remains deeply dependent on stable energy flows and replacement capacity remains extremely limited in the near term. These risks are real and deserve respect.

However, what matters just as much is how markets absorb and express that risk. Oil prices reflect expectations, probabilities and timing rather than outcomes alone. When fear becomes widely shared and positioning grows crowded, further upside requires developments that exceed what is already priced in. That dynamic helps explain why oil rallies have struggled to sustain momentum even as troubling headlines continue to surface.

This is where perspective becomes critical. In the current environment, I really believe that energy exposure functions best as a near‑term hedge rather than a core investment thesis. Current price levels will be difficult to sustain for extended periods because of the extreme strain they place on consumers and businesses, pressure that is already becoming visible in economic data. Framed this way, the purpose of oil exposure is to offset near‑term risks elsewhere in the portfolio rather than serve as the primary driver of returns.

Hedges are not meant to be permanent or precisely timed. Their role is to provide protection when uncertainty rises, and that is exactly how energy has functioned over the past month. Viewing the sector through this lens changes decision making. Position size becomes more disciplined and gains are treated as risk offsets rather than confirmation of a long‑held belief.

This approach has allowed us at TriVest Wealth Counsel to remain aligned with a broader theme that extends beyond energy. Elevated oil prices act as a tax on consumers and businesses, tightening financial conditions and increasing the risk of a slowdown. History suggests when that pressure builds, central banks respond by cutting rates and expanding balance sheets through renewed government debt purchases.

That expectation played out last Tuesday night. Reports of a ceasefire triggered a sharp decline in oil prices, while certain commodity producers, particularly in

gold

and

copper

, rallied strongly. That move reflected shifting expectations around interest rates, liquidity and currency values rather than renewed optimism about economic growth.

Gold benefits from falling real rates and expanding monetary balance sheets. Copper benefits when investment cycles remain supported by policy even as demand cools. These dynamics explain why energy currently plays a supporting role rather than the centre of gravity in our client portfolios.

Oil markets are likely to remain volatile as geopolitical uncertainty persists. In fact, oil prices were already swinging again last week in reaction to doubts about the ceasefire. Investors who treat energy as a hedge rather than a conviction trade, and who remain positioned for policy responses to elevated oil prices, are better prepared to navigate uncertainty without being driven by it. Sometimes the most effective positioning is not about predicting the next headline but about understanding how markets are likely to respond once it arrives.

Martin Pelletier, CFA, is a senior portfolio manager at Wellington-Altus Private Counsel Inc., operating as TriVest Wealth Counsel, a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit/oversight and advanced tax, estate and wealth planning. The opinions expressed are not necessarily those of Wellington-Altus.

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