This feels like 2007….
In 2007, oil prices surged to record highs while equity markets remained buoyant. Global growth looked solid, unemployment was low, and corporate earnings were still rising. The warning signs weren’t obvious—at least not yet. Oil wasn’t spiking because demand was collapsing, but because supply was struggling to keep up. Equities tolerated higher energy prices for longer than many expected, right up until inflation, tighter financial conditions, and weakening consumption began to interact in ways the market could no longer ignore.
Fast forward to 2026 and the setup feels uncomfortably familiar. Oil prices are once again elevated, driven not by a demand boom but by supply constraints and geopolitical risk. Equity markets, meanwhile, remain resilient, supported by still‑reasonable growth assumptions and confidence that disruptions will prove temporary. History doesn’t repeat perfectly, but it often rhymes. High oil prices and strong equities can coexist—but they rarely do so indefinitely. The real risk isn’t the oil shock itself, but what it quietly sets in motion beneath the surface.
From Range‑Bound to Risk‑Weighted Lower
In my post from early January, I outlined a view that the S&P 500 (SPX) could experience a blow‑off top toward 7,500 before a meaningful decline in 2026, retracing to more historically normal valuation levels—around 20–30% below a 7,000 index level.
What’s notable since then is that the market has remained range‑bound between roughly 6,500 and 7,000 for the past five months. On Friday, the SPX broke a key technical support level at 6,550 and closed below it. From a technical perspective, a weekly close below an important support level signals a trend change roughly 60–70% of the time.
As a result, I am now less confident we will see a move to 7,500+ in 2026. Whether this marks the early stages of a broader bear market remains to be seen—but recent price action suggests downside risks are increasing. I don’t want to spend too much time on the US‑Iran conflict, but where we are now matters, because regardless of whether the conflict is short or prolonged, the global inflation outlook has just undergone a significant paradigm shift.
Another War—or Is This “The Fourth Turning”?
(see bottom of post for audiobook links)
The Fourth Turning is the moment when history stops drifting and starts forcing outcomes. It’s the phase where excess debt, broken institutions, social fragmentation, and geopolitical tension can no longer be managed with narratives, stimulus, or hope. In past cycles, this was the Great Depression and World War II—periods where the old order didn’t slowly reform, it collapsed and was rebuilt under pressure. Fourth Turnings are not about forecasts; they’re about inevitability. Individualism gives way to collective sacrifice, markets lose their insulation from politics, and stability is restored only after something breaks. When viewed through this lens, the convergence of war, energy shocks, inflation persistence, financial repression, and declining trust in institutions isn’t noise—it’s the signal. The Fourth Turning isn’t coming. It’s already here.
As the US‑Israel conflict with Iran enters its fourth week in March 2026, energy markets have borne the brunt of the escalation. Iranian retaliatory strikes on Gulf infrastructure and disruptions to shipping through the Strait of Hormuz—which carries roughly 25% of global seaborne oil and 20% of LNG—have sent Brent crude surging more than 50% from pre‑war levels, recently trading around US$100–110 per barrel. What began as a targeted geopolitical operation has rapidly evolved into a classic supply shock, injecting volatility into an economic backdrop that, only weeks ago, was viewed as resilient.
Before the escalation, projections pointed to steady global growth of ~3.3% in 2026, underpinned by AI‑driven productivity gains, relatively accommodative financial conditions, and contracting global inflation. That baseline has now been blown up—literally. Higher energy prices are feeding through global supply chains, lifting inflation expectations and undermining business and consumer confidence. But the remedy for higher inflation is, ultimately, higher interest rates.
Regional Divergence Matters
From an Australian perspective, divergence across regions is critical. The US economy remains comparatively resilient, with 2026 growth still tracking around 2.2–2.4%, supported by its position as a modest net energy exporter. Europe, by contrast, is far more exposed to higher oil and gas prices, with the ECB cutting its 2026 growth outlook to just 0.9% while lifting inflation forecasts to 2.6% (arguably still under‑cooked).
Where Does Australia Sit?
Australia sits somewhere in between. While we benefit from strong LNG and commodity export exposure, we remain price takers for global energy and fuel costs. Any sustained rise in oil prices flows directly into petrol, transport, food, and services inflation, complicating the RBA’s position. We are now reverting to where we were just 18 months ago—with the cash rate at 4.35% and mortgage rates near 6%.
The duration of the conflict is now the critical variable. In a short‑lived scenario, oil and LNG prices are expected to retrace sharply, with only a modest drag on global growth (0.1–0.2ppt) and central banks remaining broadly on track for gradual easing. A more prolonged conflict, however, could push Brent toward US$120–130 per barrel, re‑accelerating inflation across Europe and Asia and increasing the risk of further rate hikes.
In effect, inflation may not fall meaningfully until higher rates cool demand hard enough to cause a recession.
Lessons from the 1970s
Australia’s experience in the 1970s reinforces a critical but often forgotten lesson: energy shocks entrench inflation—they don’t extinguish it quickly. Following the oil crises of 1973–74 and 1979, inflation surged into double digits and remained elevated well into the 1980s, even as growth slowed and unemployment rose.
Crucially, inflation did not fall simply because oil prices stabilised. Cost pressures flowed through transport, food, construction, and manufacturing, while wage indexation embedded inflation expectations across the economy. Once reset higher, those expectations proved difficult to reverse. Inflation became a structural problem, not a temporary shock.
Interest rates ultimately had to do the heavy lifting. Monetary tightening through the late 1970s and early 1980s forced recessionary conditions before inflation was finally broken. The lesson is clear: inflation only falls when demand is slowed decisively—not when energy prices merely stop rising.
Why the Comparison Matters Now
There are clear parallels for Australia today. While higher commodity prices lift national income, domestic CPI remains highly sensitive to fuel, freight, and energy costs. When inflation is already above target, these shocks reinforce persistence rather than fade quickly.
The RBA faces a familiar dilemma. Ease too early and inflation expectations risk becoming embedded—the defining policy mistake of the 1970s. Hold rates higher for longer and recession risks rise. History suggests inflation rarely retreats without economic pain, particularly following supply‑driven shocks.
The difference today lies in institutional strength—independent central banks, inflation targeting, and weaker wage indexation reduce the risk of a full wage‑price spiral. But the core lesson remains unchanged: energy shocks change inflation regimes, not just inflation prints.
So Where to Now?
Bear markets are not periods to retreat from equities, but periods to prepare. The most attractive long‑term allocations are made when fear is elevated, valuations compress, and capital becomes scarce. The opportunity rarely feels obvious; it emerges as earnings reset, risk premia expand, and quality assets are repriced below intrinsic value.
I invest very differently from traditional portfolio construction. Rather than broad diversification, I prefer a highly concentrated approach, targeting assets capable of 3–10x returns over a 10‑year horizon across venture capital, private equity, alternatives, and specific thematic exposures.
Long‑term readers will know I have been particularly bullish on Imricor, investing from around 30 cents, with the stock now trading near $2.00. I have not sold any shares. I believe a further 5–15x opportunity remains over the next 5–7 years.
Last month, I received an independent research report from Hamma Capital —the best piece of research I’ve read in over three years. It translates a complex, technical business into a clear and compelling investment thesis, and is well worth reading. IMR Investment Bulletin PDF Download Link
Outside of Imricor, I added to Bitcoin around US$70,000. While the technical setup still looks bearish—with downside risk toward US$55,000—my long‑term view remains bullish. Gold is back on my radar, with an entry target closer to $4,100, and I remain in accumulation mode for nuclear energy themes. On the equities side, I’m watching for capitulation or exhaustion signals in Xero, BHP, WiseTech, CSL, and Cochlear.
Periods like this rarely reward certainty, but they consistently reward preparation. When inflation regimes shift, geopolitics intrudes, and valuations compress, the goal isn’t to predict the next headline—it’s to position for what comes after the adjustment. History shows that the best long‑term outcomes are built not at market highs, but in the uncomfortable, volatile phases when narratives break and capital is repriced. Whether this proves to be a pause, a deeper correction, or something more structural, the discipline remains the same: protect downside, preserve optionality, and be ready to act decisively when genuine opportunity emerges.
Unitil next safe investing and by all means feel free to share this post with friends and family.
Audio Books 4th Turning
The Fourth Turning – William Strauss & Neil Howe
(Audiobook – Audible Australia)
👉 https://www.audible.com.au/pd/The-Fourth-Turning-Audiobook/B0CLWNZVHK
🎧 The Fourth Turning Is Here – Neil Howe
(Audiobook – Audible Australia, sequel)
👉 https://www.audible.com.au/pd/The-Fourth-Turning-Is-Here-Audiobook/B0BJSN1QD4
