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The Master Investor Podcast with Wilfred Frost

Episode: IRAN WAR BONUS: Ruchir Sharma on Market Reaction to US-Israel War
Date: March 4, 2026

Overview

In this bonus episode, host Wilfred Frost sits down with Ruchir Sharma, Founder and CIO of Breakout Capital, to examine the market reaction to the US-Israel war involving Iran. The focus is on the impact of the conflict on oil prices, regional and global markets, and the broader economic outlook. Sharma’s central thesis is that, despite alarming headlines, markets have remained relatively calm and the conflict’s economic effects have so far been contained. The conversation blends historical perspective, data-driven analysis, and regional insight, offering listeners a clear-eyed view of how investors and markets are responding in real time.

Key Discussion Points & Insights

1. Oil Price Increases: The Transmission Mechanism

Historical Context
- Sharma underscores that geopolitical conflicts typically impact the global economy primarily via oil price spikes.
- The current increase in oil prices does not rank even "among the top 30 oil price increases following a geopolitical conflict."
  - Quote (Ruchir Sharma, 00:00):
    “This currently ranks as not even among the top 30 oil price increases following a geopolitical conflict... so it's just not that big so far.”
Threshold for Economic Impact
- Sharma suggests oil would need to rise “another 10, 20% at the very least before this begins to have a really major impact” on the global economy.
  - Quote (Ruchir Sharma, 01:58):
    “I think we'd need the price of oil to go up by another 10, 20% at the very least before this begins to have a really major impact.”

2. Market Reaction: Reshuffle and Degrossing, Not Panic

Structural Moves Over Fundamental Weakness
- The conflict has primarily triggered a “degrossing” in the markets – a reversal of prior winning strategies and sudden outperformance of previous laggards.
  - Quote (Ruchir Sharma, 01:58):
    “This has been the trigger for what is referred to in financial terms as degrossing... except for this massive reshuffle that’s taken place at the margin.”
Regional Performance
- Israeli stock market has shown “remarkable resilience,” outperforming most global markets since the outbreak of conflict in October 2023.
  - Quote (Ruchir Sharma, 03:09):
    “The Israeli stock market, ever since the conflict began in October 2023, ended up being about the best performing stock market in the world... and even now, that stock market seems to be holding up pretty, pretty well.”
Potential for Escalation
- Sharma notes he would only get worried if regional markets began to “panic,” which could indicate the conflict spiraling out of control.

3. Are Oil and Gas Markets Underreacting?

Sharma maintains the relatively calm movement in oil and gas prices is “consistent” with regional market behavior.
- Quote (Ruchir Sharma, 04:57):
  "If you look at the Israeli market, you look at the regional Gulf markets... it's relatively calm."
Reshuffling Outside of the Region
- Some markets like Korea and Brazil have been hit, not due to direct exposure, but because they had seen sharp gains and high leverage.
  - Quote (Ruchir Sharma, 05:30):
    “There's no reason why Brazil should get hit because of this crisis... but Brazil's getting hit just because it had gone up a lot in the last few weeks, just like Korea...”

4. Implications if Oil Spikes Further

Who Gets Hurt?
- If oil hits $100 per barrel, “I don't see any places to hide except cash.”
  - Quote (Ruchir Sharma, 07:09):
    “If the price of oil gets to $100 or so, I don’t see any place to hide except cash.”
Relative Outperformers
- Net energy exporters (e.g., US, parts of Latin America) would suffer less than importers (e.g., Asia, Europe), but overall, “everything's going to be down.”
Safe Havens Disappointment
- Even traditional safe assets like gold failed to perform in this environment.
  - Quote (Ruchir Sharma, 07:09):
    “We saw that on Monday, that when the markets did have a bit of a sell off, even gold did not hold up...”

5. Regional Impact: US, Asia, and China

Impact on US Markets
- As a net energy exporter, the US is relatively insulated but not immune; recent resilience reversed a year-long trend of US market underperformance.
  - Quote (Ruchir Sharma, 08:15):
    “The US was really underperforming the international markets significantly... but in the last few days, the American markets have held up better.”
Asia: High Vulnerability
- Energy importers in Asia are exposed if the crisis escalates.
China's Posture
- China has built up oil reserves but remains vulnerable; Sharma suggests it is quietly advocating de-escalation, understanding its exposure and lack of strong alliance with Iran.
  - Quote (Ruchir Sharma, 09:39):
    “China realizes it is vulnerable to any sustained oil price shock. Its interest is very much in seeing the situation come to an end... and I don't think it sees Iran as an ally worth fighting for.”

Notable Quotes & Memorable Moments

On Oil Price Impact:
“We’d need the price of oil to go up by another 10, 20% at the very least before this begins to have a really major impact.” (Ruchir Sharma, 01:58)
On Market Behavior:
“This has been more a catalyst for a reshuffle in the markets, a degrossing move, rather than something more fundamental.” (Ruchir Sharma, 05:36)
On Israel Market Resilience:
“The Israeli stock market… ended up being about the best performing stock market in the world since then… and even now, that stock market seems to be holding up pretty, pretty well.” (Ruchir Sharma, 03:09)
On Lack of Safe Havens:
“If the price of oil gets to $100 or so, I don’t see any place to hide except cash in that… even gold did not hold up in that environment.” (Ruchir Sharma, 07:09)

Key Timestamps

[00:00] – Opening remarks on current oil price increases vs. historical standards.
[01:58] – Sharma’s view on degree of market disruption needed to derail global economy.
[03:09] – Insight on Israeli stock market performance.
[04:46] – Analysis of whether oil and gas are underreacting.
[05:30] – Impact on non-regional markets like Brazil and Korea.
[07:09] – Global fallout if oil spikes to $100.
[08:15] – Discussion on the US as a net energy exporter.
[09:39] – China's strategic interests and response to the crisis.

Conclusion

Ruchir Sharma’s measured analysis emphasizes that, while the Middle East conflict is seismic geopolitically, its impact on global markets has so far been limited and more mechanical than fundamental. Markets remain calm, oil prices are not soaring by historical standards, and investor behavior reflects tactical reshuffling rather than panic. However, Sharma cautions that escalation could shift this status quo rapidly—especially if oil prices rise further—while also highlighting the unique positions of the US, China, and other major economies. For now, the market’s main story is one of rebalancing, not catastrophe.

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Transcript14 lines

[00:01]
A
This currently ranks as not even among the top 30 oil price increases following a geopolitical conflict. Right. So it's just not that big so far. I think we need the price of oil to go up by another 10, 20% at the very least before this begins to have a really major impact. So this has been more a catalyst for a reshuffle in the markets, a degrossing move, rather than something more fundamental. Something more fundamental will happen if I begin to see some of the regional markets begin to panic. And that would tell me that, yeah, this conflict is spinning out of control. And then you can like look back and say that, yeah, even the oil and the gas markets are underreacting, but so far I don't have any such view.
[00:51]
B
Welcome to the Master Investor Podcast with me, Wilfred Frost, for this quick bonus episode with Rusher Sharma, the founder and CIO of Breakout Capital. Our full episode with Rusheer drops on Monday, so make sure you hit follow or subscribe if you haven't done so already. But in this bonus episode, here are Rusher Sharma's views on the Iran war and what it means for markets. The Master Investor podcast is sponsored by BNY Investments, Elseg and Interactive Brokers. Please do remember the views expressed in this podcast are for general information purposes only. Nothing in the podcast constitutes a financial promotion, investment advice, or a personal recommendation. More on that in the show notes. Rasheer. Let's talk about your market views on the situation now in the Middle East. I guess the first question I have on that is how long the current level of conflict, the current level of then market disruption, has to persist to really derail the global economy?
[01:58]
A
Well, historically, if you look at the transmission mechanism, Wilf, it's really been through one route, right, which is the price of oil. And I think that so far the increase in the price of oil has not been severe enough, which is that in fact, if you look at the historic oil price increases, this currently ranks as not even among the top 30 oil price increases following a geopolitical conflict. Right? So it's, it's just not that big so far. I think we'd need the price of oil to go up by another 10, 20% at the very least before this begins to have a really major impact. Now, what we've already seen in markets is that this has been the trigger for what is referred to in financial terms as degrossing, which is that across the world, the winning strategies of the past few weeks and months have been reversed quite abruptly. And the ones which were actually underperforming have held up. So on an overall basis, the markets themselves haven't done that much, except for this massive reshuffle which has taken place at the margin. Of course, the oil producing companies and countries are doing relatively better. But so far this has been a trigger for a big reshuffle that's happened with hedge funds and other leveraged people degrossing their books. But this has not been a major event so far. And you know, I wrote this piece, I remember last year for the Financial Times as part of my column, that possibly the most important market to look at just now is the Israeli market. And what struck me in the summer of last year was that despite all these negative geopolitical headlines, the fact is that the Israeli stock market, ever since the conflict began in October 2023, the Israeli stock market ended up being about the best performing stock market in the world since then, right up until even July last year when the first direct skirmish took place with Iran. And even now, that stock market seems to be holding up pretty, pretty well. So that's telling you in some ways that this is a very unfortunate event that's going on. But at least so far, the market's perception is that Israel in general is prevailing. And it's also possible that the markets are reading the fact that with Iran fading as any threat in the region, that eventually that region could even emerge more stable.
[04:46]
B
That's an interesting kind of perspective on it. Do you think that oil and gas markets are underreacting then, given the scale of what we've seen?
[04:57]
A
No, but as I said that if I look at what's happening in some of the other markets, it's sort of consistent. Right. As I said, if you look at the Israeli market, you look at the regional Gulf markets as to how they're behaving, it's relatively calm. So I'd say that the view is that things are, that the headlines are very scary. There's always the potential that this completely spins out of control because of what's been unleashed. There is a lot of debate about what exactly is the end objective here. But so far at least I'd say that the markets have been relatively calm. At least if we look at the markets at the epicenter of this, and if anything, what this has done is that this has been a trigger for a degrossing, because some of the markets that have been very badly hit have been markets like Korea or even Brazil. And these markets had gone up a lot. And there's no reason why Brazil should get hit because of this crisis because Korea, you can still understand that it's a big oil importer and there's some sensitivity out there. But Brazil's getting hit just because it had gone up a lot in the last few weeks, just like Korea and Korea, there was a lot of leverage in the system there. The retail investors were punting. So it's that kind of reshuffle which has happened. So this has been more a catalyst for a reshuffle in the markets, a degrossing move, rather than something more fundamental. Something more fundamental will happen if I begin to see some of the regional markets begin to panic. And that would tell me that, yeah, this conflict is spinning out of control. And then you can look back and say that, yeah, even the oil and the gas markets are underreacting. But so far I don't have any such view.
[06:45]
B
And if that were to happen, Rasheer, just hypothetically, would the classic analysis be because so much of what comes out of Iran and goes through the Straits goes to Asia. Would the classic analysis be an energy importer in Asia will suffer and an energy exporter elsewhere should actually benefit. So in that sense, Brazil should benefit, for example?
[07:09]
A
Yeah, I'd say that on a relative basis. But if you end up getting a big shock for the global economy that the price of oil gets to a hundred dollars or so a barrel, I think that brings everyone down. I don't see any places to hide in that environment, especially because, remember, in the build up to this, we've seen everything go up a lot, including gold and silver, you know, the classic safe havens, so to speak. But if the, and we saw that on Monday, that when the markets did have a bit of a sell off, even gold did not hold up in that environment. So I think that if the price of oil gets to $100 or so, I don't see any place to hide except cash in that. And yes, there'll be relative outperformers and underperformers that the Latin American markets should relatively do better. But in that environment, I think it's a problem for global markets in general. Everything's going to be down.
[08:08]
B
And what about for the US as a net energy exporter these days? If we do get $100 on oil, it's bad for them.
[08:16]
A
Yes, it's bad. Undoubtedly it's less bad. Right. So I think that's what we even sort of seeing play out in the last few days as well, which is that the US was really underperforming the international markets significantly. And that's a big change and it's one of the big themes that we'll speak about that how this very fad of American exceptionalism was fading that was really declining. Where at one point in time people thought the only place in the world to invest in was America, the rest of the world didn't matter. But America had started to underperform quite meaningfully over the past year or so. But in the last few days, the American markets have held up better compared to the international markets. And a part of their visa, as I said, is this degrossing move where people were very tactically long that they have cut back on those positions. And part of it also reflects this oil order which you referred to, which is that the US Is not that dependent on imported energy anymore. And as a net exporter, the European and Asian nations are much more vulnerable to an energy shock. And so they've suffered more.
[09:29]
B
And just finally on the Iran issue, Rasheer, what does it all mean for China? Still quite reliant on importing fossil fuels, but have they successfully built up their reserves?
[09:40]
A
Yeah, the reserves are relatively okay, but at the end of the day, I think that China is sort of, I'm sure behind the scenes engaged in quite trying to calm the situation down because it's really not in their interest in terms of what's happening. And I think that it's also notable that China has not offered Iran any major support after appearing like their ally for a time. So I think that China realizes that it is vulnerable to any sustained oil price shock. Its interest is very much in seeing the situation come to an end. And I think it's implicitly taken a bet that there's no point really supporting Iran here. And the best way for this geopolitical conflict to end is really if
[10:33]
B
it
[10:34]
A
may not be a very palatable outcome to them. But if at all, the US and Israel prevail out here and the conflict can come to some sort of an end, I think that China would possibly see in its commercial interest because it really sees this about oil, and I don't think it sees Iran as an ally worth fighting for.
[10:57]
B
That was Ruchir Sharma from Breakout Capital talking to us about his views on the market's reaction so far to the Iran war. Don't forget our full conversation with Rasheer Drops on Monday. Make sure to hit, follow or subscribe if you haven't done so already. Thanks so much for listening. The Master Investor podcast is sponsored by BNY Investments, Elseg and Interactive Brokers. Please do remember the views expressed in this podcast are for general information purposes only. Nothing in the podcast constitutes a financial promotion, investment advice, or a personal recommendation. More on that in the show Notes this podcast is produced by Paradine Productions and Master Investor, Ltd. In association with Birdline Media. If you've enjoyed the show, please do subscribe on YouTube or click follow on your podcast platform and you'll be automatically notified each time a new episode drops.