The conflict in the Middle East raises immediate questions for investment committees. When geopolitical events unfold rapidly, the first question long-term investors tend to ask is straightforward: is the portfolio behaving as expected?
Alongside this sits a second question: how long might the disruption last?
Financial markets often react quickly, but for long-term asset owners the more relevant issue is how economic confidence, capital flows and investment activity may evolve if uncertainty persists. Strategic asset allocation is rarely adjusted in response to short-term shocks. What may change more readily is the pace of capital deployment as committees slow new commitments, preserve liquidity or defer transactions while visibility remains limited.
In that sense, geopolitical shocks test not only markets, but also the governance frameworks that underpin long-term investing. Institutions with clear processes are better positioned to absorb volatility without being forced into reactive decisions.
A useful way to structure these discussions is across three horizons: a week, a month and a quarter (Figure 1). These are not forecasts, but a framework for assessing how portfolio behaviour, economic transmission and confidence evolve over time.
Figure 1. How asset owner investment committees think about crisis duration
| Time horizon | Primary focus | Typical investment committee questions |
| A week | Market functioning and liquidity | Are markets functioning normally?
Do we have sufficient liquidity? Are dislocations creating opportunities? |
| A month | Economic confidence and transmission | Are capital flows slowing?
Is investment activity being delayed? Should we adjust the pace of deployment? |
| A quarter | Economic resilience and policy coordination | Could prolonged uncertainty affect economic momentum?
What role might long-term capital play in maintaining confidence? |
Source: Aka & Associates
A week: portfolio behaviour as a stress test
In the immediate phase, investment committees focus on understanding how the existing portfolio is behaving rather than making adjustments.
Periods of market stress act as real-time stress tests. Committees assess whether diversification is functioning as expected, whether volatility remains within anticipated ranges and whether any unintended concentrations are emerging.
If the portfolio behaves broadly as designed, it reinforces confidence in the strategy and allows space for measured analysis. The defining advantage of long-term investors is their ability to observe volatility without being forced to respond.
Liquidity is reviewed, but for most large asset owners it is not the primary concern. Portfolios are typically constructed to absorb periods of stress without requiring forced sales. While operating businesses in certain sectors may begin to feel pressure relatively quickly, these signals are usually monitored rather than acted upon at the portfolio level.
At this stage, the emphasis remains firmly on discipline, not action.
A month: economic transmission and constraints
If uncertainty persists, the discussion shifts towards how geopolitical risk may begin to affect economic activity. Committees assess how confidence, capital flows and investment pipelines are evolving. In globally connected economies, even short periods of uncertainty can begin to influence transaction activity and foreign investment decisions.
At the same time, the distinction between public and private markets becomes more relevant. Public markets provide the primary mechanism for adjusting exposures, while private market portfolios evolve more slowly. Existing commitments remain in place, capital calls continue and there are relatively few short-term levers available.
In that sense, the illiquidity of private markets acts as both a constraint and a stabilising feature.
For most asset owners, the key decision at this stage is not strategic allocation, but the pace of deployment. New commitments may slow while liquidity buffers are preserved and the economic outlook becomes clearer.
A quarter: confidence and economic perception
If disruption persists, the discussion becomes more structural.
The focus shifts from market behaviour to whether uncertainty is beginning to influence economic confidence and capital flows. Even when markets remain stable, investment pipelines and expansion decisions may slow as businesses reassess risk.
In regions where international capital plays a central role, these confidence effects can be particularly important. The question becomes not simply how capital responds in the short term, but how the region is perceived by global investors, and how quickly confidence may return.
For investment committees, this forms part of the broader strategic context rather than a trigger for immediate portfolio change.
When the shock is intertwined with the economy
Geopolitical shocks in the Middle East introduce an additional dimension. The institutions managing long-term capital often operate within economic systems that are themselves directly affected.
This creates two related but distinct questions: how the shock affects the portfolio, and how it affects the wider economy.
From a governance perspective, these responsibilities remain separate. Portfolio decisions sit with investment committees, while broader economic policy sits with governments. In practice, however, institutional proximity means these discussions can overlap, particularly where leadership oversight spans both global portfolios and domestic development agendas.
Recognising this distinction, while acknowledging the overlap, is central to understanding how investment committees operate in the region.
The role of long-term capital
Large asset owners in the region were originally established to transform hydrocarbon revenues into diversified financial assets capable of supporting economies over time.
Today, their global portfolios generate meaningful income and diversification. In periods of uncertainty, these portfolios can provide stability, reducing reliance on more volatile domestic revenues.
They can also play a catalytic role in supporting investment activity. Through co-investment, anchor commitments or risk-sharing structures, long-term capital can help sustain investment pipelines when private capital becomes more cautious.
In that sense, their role is not only to absorb shocks, but also to support the return of confidence as conditions normalise.
Geopolitical shocks test not only markets, but process.
For long-term asset owners, the discipline of investing lies not in predicting events, but in ensuring that portfolios are resilient and governance frameworks remain robust. The week, month and quarter framework reflects how investment committees move from assessing portfolio behaviour to understanding economic transmission and, ultimately, monitoring confidence.
Resilience is determined less by the ability to forecast geopolitical outcomes and more by the strength of the structures designed to navigate them.
Jahangir Aka is Founder of Aka & Associates. Paul O’Brien is Chair of the Audit and Risk Committee and member of the Investment Committee of the Wyoming Retirement System.
This article is a summary of a longer whitepaper, ‘A Week, A Month, A Quarter : How Asset Owner Investment Committees May Think About Geopolitical Risk in the Middle East’.
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