The Global Conflict Portfolio: Why Macro Investing Matters More Than Ever

• A dynamic macro strategy is required to navigate emerging geopolitical turmoil

• Assessing the global conflict we propose a Global Macro Portfolio that may benefit from escalating tensions

• Oil, defense & cybersecurity stocks, gold, US Treasuries, and even bitcoin are in focus

As Senators were putting the finishing touches on their tweaks to the House’s One Big, Beautiful Bill, there was activity at the Pentagon. 

One little-known geopolitical indicator began to flash a warning signal. It was the Pentagon Pizza Tracker—a quirky but apparently reliable high-frequency activity gauge that informed macro investors when officials at the Department of Defense put in late-night food orders. The presumption is that military experts pulling all-nighters could portend something more serious: troops mobilizing and bombs about to drop in distant lands.

The Pentagon Pizza Report Indicator Lit Up on June 12

Source: Pentagon Pizza Report, X

The Pentagon Pizza Tracker is a meme of sorts, but it portended volatility across asset classes that began on the night of Thursday, June 12. Israel’s airstrikes on Iran’s nuclear and military infrastructure required the US and its allies to prepare for a broader global war. “World War III” is being bandied about, which we’ve all heard before. The consensus seems to be that this will all blow over but that may not necessarily be the case. 

Are you prepared for the possibility of yet another shock to the global macro economy? Regardless of the outcome, we seem to be in a new age of permanent geopolitical tension. What began as regional skirmishes, such as Russia’s invasion of Ukraine just three years ago, brewing tensions between China and Taiwan, and now what looks like an outright war between Israel and Iran, risks may be tipping into something bigger, something more impactful and lasting to markets and your portfolio.

Rising Chance of US Action, the Potential Global-Conflict Trigger

Source: Polymarket

At Allio, we focus on the major economic forces that shape the global economy, focusing on how investors should prepare and react to volatility on the international stage. Today, we outline a Macro Portfolio—an all-weather allocation that has the potential to benefit from intensifying conflict. This is not a doom-and-gloom prediction but a sobering reassessment of where we think macro investing may add value—when the world becomes unpredictable.

If the Israel-Iran war explodes into something larger, the macro ripple effects will extend far beyond oil fields and defense contracts. It could be a boon for some asset classes and a hindrance for others. 

Why Macro Investing Matters Now

Macro investing is all about studying the big picture: geopolitics, interest rates, inflation, currency trends, shifts in power, and how so many variables feed into price action. It's understanding these thematic waves that can help investors identify risks and allocate accordingly. In peacetime, macro investing might feel academic—parsing data to connect disparate dots. But in wartime, studying macro conditions can become useful. 

Prices react fast to the latest post on X or what President Trump puts out on Truth Social. Real-time indicators, including the Pentagon Pizza Tracker, can potentially provide insights. Correlations between asset classes may behave erratically. 

Macro investing seeks to take all of these wildcards into account. Today, what’s happening in the Middle East is the latest case in point. A thoughtful portfolio can help protect against what could become a black swan event. 

As for price action, here’s what we’re witnessing:

• Jumpy WTI and Brent oil prices

• Soaring Aerospace & Defense stocks

• A bid to gold

• Rising stock market volatility

• Periodic buying of Treasuries

• Volatility in currency markets

• Bitcoin acting as a risk asset...for now

• Struggling travel and consumer stocks

Fundamentally, nations are girding for increased geopolitical tensions—defense budgets are growing globally, and the “reshoring” trend has been in focus since Russia invaded Ukraine. And while the world is generally well-supplied with oil, experts in the energy market have their eyes fixated on the key Strait of Hormuz.

These are all macro indicators, not company-specific ones; they suggest a broad approach to portfolio construction. A Global Macro Portfolio should be agile, diversified, and focused on assets that have a track record in volatile conditions. Here’s what it might look like:

What We’re Watching in the Global Macro Climate

1. Energy Stocks and Oil

WTI crude oil began its ascent not on the evening of June 12 but more than a month earlier. The price of a barrel of US oil rose from $56 to $65 in advance of the first Israeli airstrikes. Just a few hours after the conflict broke out, WTI soared to $78. A pullback to under $70 may have established a key trading range. 

Looking ahead, a rally above the June peak may mark a new stage of the war; analysts at JP Morgan talk about the potential of $130 in an escalation scenario. What might catalyze that dire outcome? Perhaps China’s involvement, or hostile moves out of Russia.

WTI Crude Oil Last Six Months: Consolidation, Still Down YoY

Source: TradingView

Shares of oil & gas companies naturally benefitted from higher WTI and Brent prices. We also saw US and international natural gas tick higher. In the first four trading sessions following Israel's strike on key Iranian military assets and personnel, the Energy Select Sector SPDR ETF (XLE) outperformed the other 10 S&P 500 sector funds, rising 3.5%. Only the Information Technology sector (XLK), away from Energy, was positive.

S&P 500 Sector ETFs Since the First Israeli Attacks: Energy (XLE) Leading

Source: Koyfin Charts

Fundamentally, about 20% of the world’s oil flows through the Strait of Hormuz. WTI and Brent in the $70s per barrel might seem like a bargain if we return to Q2 2022 levels, which were in the triple digits. 

Energy stocks are a sector we’re monitoring closely. The latest Bank of America Global Fund Manager survey revealed that the Energy sector was an extreme underweight—the report found that investors are a net 26% light on Energy, which is 1.8 standard deviations below the long-term average. 

Moreover, US large-cap oil & gas companies appear to be cheap on valuation; FactSet shows the sector’s P/E ratio is under 16, about six turns less expensive than the S&P 500. Finally, Energy sports the highest total shareholder yield of the 11 sectors, currently at 8% when combining the dividend and buyback yields.

BofA Survey: Money Managers Are Underweight Energy

Source: BofA Global Research

S&P 500 Sector Valuations: Energy the Cheapest

Source: FactSet

S&P 500 Total Shareholder Yield by Sector: Energy is the Standout

Source: J.P. Morgan Asset Management

Other items to look at: 

• Upstream oil producers: High cash flows, robust dividends, and pricing power during volatility. 

• Oilfield services: High beta to crude oil and necessary for military-adjacent energy demand.

• Midstream players: Often insulated from spot price swings but benefit from higher volume and transport needs.

There was also some upside price action in refiners, though that is more a play on the price of refined products relative to oil. More than five years removed from negative WTI prices. The US could be a sought out oil producer, so domestic drillers will be watching as WTI and natural gas tick higher.

US Oil Production is at Record Levels

Source: Our World in Data

2. Aerospace & Defense Companies

Palantir (PLTR) is up more than 80% on the year and is the best performer in the SPX, as investors continue to be drawn to its AI-driven twist to traditional defense exposure. 

Top S&P 500 Stocks YTD: Defense, AI, Cyber Strong in 2025*

*Through June 17

President Trump’s One Big, Beautiful Bill includes significant appropriation increases for missiles, drones, and intelligence, surveillance, and reconnaissance systems. Defense contractors have benefited recently, with order books stretching out years. But unlike during previous cycles, this time is different: the scale of investment isn’t just about bombs and jets. It includes space defense, cybersecurity, and everybody’s favorite—AI. 

Other items to look at:

• Large-cap defense stocks: These are blue-chip companies potentially benefitting from multi-year federal contracts.

• Dual-use tech firms: Providing both civilian and military-grade surveillance, data, and AI tools.

• Niche component manufacturers: Suppliers of guidance systems, sensors, and next-gen materials for modern conflict.

Aerospace & Defense has been favored all year, and the Israel-Iran war is just the latest catalyst.

3. Gold

Gold has had a strong year in 2025 so far. The precious metal topped out at $3,500 per ounce in April and has coiled since then. 

There are a multitude of investment vehicles that provide exposure to gold each with their own strengths and weaknesses.

GDX, up 58% YTD, Beating GLD

Source: Stockcharts.com

Beyond the war, there seems to be a perma-bid to gold. Central banks have been diversifying away from US Treasuries and into the yellow metal. While it does not produce cash flows or pay a dividend, gold’s historical appeal has been in its perceived ability to potentially hedge against both inflation and geopolitical uncertainty.

Other items to look at:

• Gold ETFs: Easy access and liquidity.

• Gold miners: Higher volatility, but with leverage to spot prices.

• Royalty companies: Less operational risk, strong margins.

Gold may also offer diversification benefits, especially if equities and bonds come under attack during an extended conflict but also has its own risks that need to be considered.

Central Banks Dig Gold

Source: Financial Times, ECB

4. Cybersecurity

The current battle (and future wars) will likely be fought with tanks, drones, and code. Specifically, cyberwarfare will include threats to power grids, financial systems, and communications networks. 

Away from the very real geopolitical risk, companies from all sectors must prioritize the threat from cyber terrorists. Hence, even if a global recession unfolds, the last line item to be cut from corporate expense budgets might be cybersecurity. Both governments and corporations are racing to harden their systems.

Other items to look at:

• Pure-play cybersecurity stocks: Riding a multi-year wave with the potential for added demand from global conflict.

• Diversified cloud/security players: Leading software providers with embedded cybersecurity divisions might offer diversification that may also rally if a recession is bypassed.

• ETFs that could help to diversify exposure.

5. Real Estate: Selective Opportunities Amid Turmoil

Most Global Macoro Portfolios include a lot of what you’d expect—assets that may benefit from black swan events and geopolitical upheaval. Real Estate’s role in the allocation is more nuanced. The idea is that if we see a return of the “flight to safety” trade, in which Treasury yields fall, then rate-sensitive niches might come back in favor.

For years, investors have seemingly shunned Real Estate, as its fundamental value drops when discount rates climb. An unexpected macro shift—rising Treasury prices and falling yields—could shake up flows, impacting property stocks. 

Industrial real estate, particularly warehouses, and logistics hubs supporting military supply chains, could see increased demand. Data centers, critical for cybersecurity and AI infrastructure, are another potential mover, driven by the digitization mega-trend. Other items to look at:

• Hotel REITs: War may impact international travel, especially in conflict-adjacent regions.

• Luxury retail real estate: Discretionary spending often dips, and urban centers may see reduced foot traffic.

• Office space: Already struggling from hybrid work trends, could suffer further from global instability.

• Data center REITs: Supported by cybersecurity and cloud demand.

• Industrial/logistics REITs: May benefit from defense supply chain investment and reshoring trends.

• Defense-adjacent land holdings: Areas near military hubs may see upward pressure on rents and land values.

Treasuries, Interest Rates, and the US Dollar

Speaking of intermarket asset-class impacts, yields have been conspicuously quiet since the first missiles landed in Iran. The benchmark 10-year Treasury note rate hovers near 4.5%, while the long bond rests close to 5%. 

With an increased focus on the US budget deficit and the rising national debt, there are other macro variables to weigh. President Trump’s tariffs, a global trade war, and Federal Reserve policy are all unknowns.

Treasury Rate Volatility Conspicuously Quiet Lately

Source: TradingView

If conflict escalates, institutional investors may turn to Treasuries and the dollar. As long-term budget deficits and the threat of higher inflation from a protracted rally in commodity prices are bearish risks.  Treasuries are not without risk.

Treasury bears will argue that war is expensive and deficit spending could rise, leading to increased bond issuance and upward pressure on interest rates over time.

Bitcoin

That brings us to bitcoin. Like Treasuries, the story here is complicated. The world’s largest cryptocurrency has wobbled, even dropped, as war headlines have crossed the wires.

Bitcoin: Eyeing the 50% Retracement Point Near $93,000 for Support

Source: Stockcharts.com

Global conflict comes with heightened risk:

Macro investing is all about risk management—thinking about what not to own can be just as important as what you actually allocate to. While some sectors may benefit it’s important to remember that there are major risks to be aware of.

Other items to look at:

• Travel and Leisure: Often highly vulnerable to global instability and oil spikes.

• Consumer Discretionary: War can hurt consumer sentiment and spending.

___

The Bottom Line

The geopolitical climate is in motion so assessing all macro factors for yourself is key. Today’s investors must prepare for the possibility of an international geopolitical crisis that could result in a market black swan event.

At Allio, we believe in the benefits of a dynamic macro portfolio—one that adjusts to changing economic forces. You can invest with us today using Allio’s proprietary ALTITUDE  AI™, which integrates predictive models and macroeconomic data to guide portfolio construction, manage risk, and deliver a tailored investing experience—keeping your strategy aligned as markets evolve.