There’s no shortage of things to worry about right now.
The fragile ceasefire and failed peace negotiations in Iran continue to dampen sentiment. Oil prices are up. Inflation isn’t behaving the way policymakers had hoped. Governments are leaning further into tariffs and protectionism. And beneath all of this, something less visible but arguably more important is happening: liquidity is tightening.
If that feels uncomfortable, it should.
But before going too far down that path, it’s worth grounding in a simple idea we recently wrote about in Focus on the Things You Can Control. Most of what drives markets is outside your control. What matters is how you respond.
Think of this piece as the companion to that framework. If the earlier post was about narrowing your focus, this one is about understanding the broader landscape. Not so you can predict it, but so you can recognize what actually matters—and avoid wasting energy on what doesn’t.
We’re not dismissing these risks. We’re putting them in context, understanding how they connect, and reinforcing where control still lives.
A System Under Pressure
One of the biggest mistakes investors make is viewing risks in isolation. Oil is discussed separately from inflation, inflation separately from interest rates, and rates separately from market performance. In reality, these forces are tightly connected.
Higher oil prices feed into inflation. Persistent inflation influences central bank policy. Higher interest rates tighten financial conditions and reduce liquidity. Reduced liquidity affects valuations and market stability. Add geopolitical tensions and policy uncertainty, and what you have is not a checklist of concerns, but a system under pressure.
That is what defines the current environment. Not any one risk in isolation, but how they interact.
Oil: A Shock That Travels
Oil is often framed as a consumer issue, something that shows up at the gas pump or in airline ticket prices. But its impact runs much deeper. It’s a core input cost across the global economy, embedded in transportation, food production, electricity generation, manufacturing, and supply chains.
Recent price increases, driven by the closure of a key shipping route through the Strait of Hormuz, have reinforced how quickly energy markets can shift. When oil rises meaningfully, the effects cascade through margins, costs, and ultimately consumer spending.
The International Energy Agency (IEA) estimates that about 13 million barrels a day of oil supply have been shuttered and more than 80 energy facilities damaged, making the current disruption the biggest supply shock in history. None of this can be fixed overnight, so we’re going to have higher prices and slower growth. Not maybe, not potentially.
There is nothing you can do to control geopolitical developments or energy supply disruptions. What can be controlled is how exposed a portfolio is to these pressures and whether there is excessive concentration in sectors that struggle when (not if) costs rise.
Inflation: Not Gone, Just Different
At the start of the year, there was a sense that inflation was gradually moving back under control. That narrative has shifted. Instead of a smooth decline, inflation is proving to be uneven, influenced by energy shocks, supply chain disruptions, and policy decisions.
We are now in a more fragmented, stop-start inflation environment. Inflation could easily reaccelerate toward the mid-4% range if current pressures persist, limiting the options for central banks to respond to slowing growth and increasing the likelihood that rates stay higher for longer.
That has broad implications. Borrowing costs remain elevated, valuations face pressure, and liquidity becomes more constrained. This is not just “another” middle eastern conflict. The bottleneck at the Strait of Hormuz creates a more complex environment, with competing pressures pulling policy in different directions.
Investors can’t control the rate of inflation, but they can often control their use of leverage, time horizons, and whether portfolios are built to handle a prolonged period of higher rates.
Trade and Fragmentation
While energy and inflation dominate headlines, we can’t forget about trade policy. Increasing tariffs and protectionist measures are continuing to add friction to a system that has, for decades, been built for efficiency.
Recent developments have only added to the uncertainty. A U.S. Supreme Court decision to overturn tariff policies implemented via executive order has introduced a new layer of legal and policy ambiguity, reinforcing how fluid the trade backdrop remains.
Free trade between allies minimizes costs and maximizes economic utility. A fragmented system introduces inefficiencies, raises costs, and slows growth.
In an environment marked by persistent structural inflation and uncertain economic momentum, portfolio diversification across regions and sectors becomes critical for managing risk and maintaining resilience.
Liquidity: The Underlying Driver
If there is one theme tying all of this together, it’s liquidity.
Liquidity is invisible when markets are stable and only becomes apparent when it starts to disappear. Historically, these moments have produced some of the fastest and non-fundamental market dislocations.
In liquidity-driven selloffs, investors sell what they can, not what they want to. That can include traditionally defensive assets like gold and Treasuries.
While systemic liquidity cannot be controlled, individual investors can manage their own. Maintaining cash buffers and avoiding excessive leverage reduces the risk of being forced into selling assets at the worst possible time and allows you to take advantage of temporary market mispricings.
The Risk That Matters Most
With all of this, it’s easy to focus outward on markets, economies, and policy decisions. But the biggest risk is between your ears.
Markets don’t need a crisis for investors to experience poor outcomes. More often, it comes down to behavior. Selling during periods of stress, chasing trends, or abandoning a long-term plan when it becomes uncomfortable can do more damage to long-term results than any unfortunate market event.
The goal in an environment like this isn’t to eliminate uncertainty. That’s impossible.
The goal is to keep your perspectives centered on investing for your time horizon, diversifying your risk exposure, ensuring adequate liquidity, and staying disciplined through periods of volatility.
These are not new principles, but they become more important when the list of concerns grows longer.
Final Thought
There will always be something to worry about. Today, it’s oil prices, inflation, trade, and geopolitical tension. In another year, it will be a different set of concerns.
Radix Financial is prepared and experienced to navigate the uncomfortable, and respects that while few economic events are in our in our power to influence, predict, or control, understanding the interrelated dynamics and how we respond to them are.
As always, thank you for your continued partnership and trust.
- Amy and Jess