Everyone’s talking about oil hitting $100 a barrel thanks to the Iran situation. Fair enough—that’s a big deal. But here’s what most people are missing: the real damage to your portfolio might not come from your energy stocks or your grocery bill. It could come from your tech holdings.
Tom Hancock, who runs the Focused Equity team at GMO, has been thinking about this differently than the crowd. His track record speaks for itself—his fund has beaten 98% of similar funds over the past 15 years. And right now, he’s worried about a domino effect that starts with oil but ends in Silicon Valley.
Here’s the chain reaction: If the Strait of Hormuz stays closed and Middle Eastern oil producers can’t sell their crude, they lose revenue. A lot of it. And where does that money usually go? Into US assets. Specifically, into tech companies that are borrowing hand over fist to build AI data centers and buy hardware. “You buy their oil, money goes in, that money comes out, and it goes into things like data centers and private equity and venture capital,” Hancock explained. Less money flowing in from the region means less fuel for the AI spending spree that’s been propping up tech valuations.
But wait, there’s more. Energy costs could also squeeze tech manufacturers directly. TSMC, the chip giant that basically keeps the world’s AI dreams running, might not shut down their fabs over higher energy prices, but their profit margins? Those could take a real hit.
The good news: this isn’t an immediate crisis. For this scenario to actually tank tech investment flows, the Strait of Hormuz would need to stay blocked for months. But here’s the thing—it’s looking more likely by the day. Iran’s new Supreme Leader just said they’re keeping that shipping lane shut, and oil prices surged back to $100 on the news.
So what’s a nervous investor supposed to do?
Hancock’s playbook is to rotate into healthcare. It’s the classic defensive move, sure, but he’s not just hiding—he’s actually bullish on the sector’s fundamentals right now. Healthcare stocks tend to weather market storms because people still need medical care whether the economy’s booming or tanking. But Hancock sees something deeper: real opportunity.
He’s particularly into UnitedHealth Group. Here’s his take: “United Health Group can be very volatile about whatever news is coming out of CMS and US policy. So depending on what the news flow is, that’s actually when those kind of companies tend to do best, when no one’s talking about them.” Translation: when everyone’s panicking about something else, that’s when smart money moves into healthcare.
If you want broader exposure without picking individual stocks, the State Street Health Care Select Sector SPDR ETF (XLV) and the iShares US Healthcare ETF (IYH) are solid options.
The bottom line: Oil prices are just the headline. The real story is about capital flows, energy costs, and where smart money goes when the world gets messy. And right now, that’s healthcare.