EverPar Director of Investments David Ellis breaks down how the Iran conflict is affecting energy prices, what it means for Fed policy, and how we’re positioning client portfolios heading into Q2 2026.
By David Ellis, Director of Investments, EverPar Advisors
Every quarter, there are a handful of things worth stepping back and addressing directly with clients. This quarter, geopolitics is at the top of that list.
The situation in Iran and the pressure on the Strait of Hormuz has been pushing energy prices higher, and I’ve been getting a lot of questions about what that means for the broader economy and for individual portfolios. Michael Christian and I sat down to work through exactly that, and I wanted to expand on a few of the key points here.
Energy Prices as a Tax on Growth
When oil and gas prices rise, the effects don’t stay contained to the gas station. Those costs flow through manufacturing, transportation, and food production before eventually landing on consumers. When consumers are spending more on essentials, they have less to spend elsewhere, and that slowdown works its way through to corporate earnings and GDP growth. The chain runs from the Iran conflict through an energy spike, higher input costs, reduced consumer spending power, and ultimately slower growth across the economy.
As I put it during our conversation, higher energy costs act almost like a tax on growth.
The Fed’s Difficult Position
This is where things get complicated. The Fed’s target is 2% inflation. We’ve been floating between 2.5% and 3% for a while now, never quite reaching that goal. Now, with energy costs adding upward pressure, the Fed faces a genuine dilemma. Cutting rates risks reigniting inflation at a time when it hasn’t been fully brought under control. Keeping rates elevated continues to weigh on an economy that’s already showing signs of slowing.
Neither path is clean, which is why a higher for longer rate environment is the most likely outcome for the foreseeable future. To put some numbers to it, inflation is currently running between 2.5% and 3%, and until we get meaningfully closer to that 2% target, the Fed’s options remain limited.
What This Means for Portfolios
The good news is that a higher rate environment does create opportunities. Below is a summary of how we’re thinking about positioning right now.
On the fixed income side, income generated from those holdings increases when rates stay elevated, which is a direct benefit for clients positioned there. On the equity side, we’re being deliberate. We’re not making dramatic moves right now. The situation in the Middle East could shift quickly. If the Strait of Hormuz reopens, a lot of the pressure we’re discussing today eases. We’re watching that closely.
In the meantime, we’re reviewing which sectors have historically performed well when rates stay elevated and positioning accordingly. For clients here in Oklahoma with energy sector exposure, rising oil prices have actually worked as a natural hedge, which has been a positive for those portfolios.
The Bottom Line
The macro environment is complex right now, but it’s navigable. We’re staying patient, staying informed, and making adjustments where the data supports it. If you have questions about how any of this applies to your specific situation, reach out to your advisor directly.
Source: Federal Reserve — “Statement on Longer-Run Goals and Monetary Policy Strategy” https://www.federalreserve.gov/monetarypolicy/files/FOMC_LongerRunGoals.pdf
Source: Bureau of Labor Statistics — Consumer Price Index summary (most recent release) https://www.bls.gov/news.release/cpi.nr0.htm
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