As the conflict between the United States and Iran intensifies, the global economy is once again facing volatile market conditions. Prices of oil are sparking, and investors are fleeing into shock-absorber assets such as oil and gold (GCK26).
In his 1979 shareholder letter, Warren Buffett stated that while the government is "exceptional" at "printing money and creating promises," it remains fundamentally unable to “print gold or create oil.” Although written nearly five decades ago, this observation remains strikingly relevant as geopolitical instability drives investors toward material assets.
Rising Oil Prices and the Strait of Hormuz
As the bombings continue, investors have gravitated towards oil, which has seen price increases due to supply cutoffs. One reason for the current oil market volatility is the effective closure of the Strait of Hormuz. As of early March 2026, the waterway, which typically funnels 20% of the world's daily seaborne oil, has become functionally impassable for most commercial shipping following threats from Iran to set vessels ablaze. These threats have led to an 80% drop in traffic.
This physical disruption has had immediate economic consequences. Crude oil futures have surged 35% in just the last five days while supply is temporarily cut off. The escalation, fueled by U.S. and Israeli actions against Iran, has forced investors to confront the reality that promises of energy security mean little when the physical infrastructure of supply is under attack. However, while the prices of oil increase, oil companies collect more revenue and investors can potentially expect higher returns.
Buffett’s Intrinsic Value Argument
In his 1979 letter, Buffett compared Berkshire Hathaway’s (BRK.A) (BRK.B) book value to the price of gold. He noted that after 15 years of "blood, sweat, and tears" and plowing back all earnings, the company’s increased book value still only bought about the same half-ounce of gold it would have in 1964. He drew a similar comparison to oil, highlighting that while currency can be printed without direct resource issues, precious materials are finite and scarce.
While Buffett has famously avoided gold because it lacks cash flow, he has aggressively applied this logic to the energy sector. Berkshire Hathaway has taken substantial stakes in oil giants like Chevron (CVX) and Occidental Petroleum (OXY). Berkshire recently increased its position in Chevron, which has climbed nearly 20% year-to-date as the conflict drives prices higher.
In times of war, it's important for investments to be diversified into safe asset classes. Investors are currently gravitating toward gold and oil for distinct, yet complementary, reasons. Gold has vastly outperformed the broader market over the last year. It acts as a "safe haven" asset, preserving purchasing power when stocks collapse and currencies weaken under the weight of inflation and geopolitical uncertainty.
People invest in oil during wartime because conflicts create an immediate fear of supply disruptions. Investors anticipate that damage to infrastructure or sanctions will decrease available supply, causing commodity prices and energy stocks to surge.
The Bottom Line
As the conflict spreads, the need for effective capital preservation increases. Buffett’s 1979 message serves as a guide for navigating an economy involved in war, and remember that assets that a government cannot simply print into existence sustain value long term. However, investors must remain cautious.
While gold and oil may offer protection against inflation and volatility, diversification remains essential to mitigate the risks of a rapidly shifting conflict. As the Strait of Hormuz remains a flashpoint and the U.S.-Iran war intensifies, the intrinsic value of what is in the ground, rather than what is on a printing press, will likely continue to dictate market leadership.
On the date of publication, Oscar Cierpial did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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