SpaceX Filed Its S-1. Here’s What Happens Next.

After years of speculation, SpaceX has officially filed its S-1 registration statement, giving investors their first detailed look at the company’s financials and starting the final countdown toward what could become the largest IPO in history. Reports suggest SpaceX could seek a valuation of roughly $1.75 trillion and raise between $75 billion and $80 billion, potentially eclipsing every IPO that has come before it.¹

For investors, the filing itself is not the most important event.

The weeks between the S-1 filing and the first day of trading are where the real story unfolds.

Here is what to expect and what I will be watching closely.

First: The SEC Review Process

Even though the S-1 has been filed, the document is not final.

The SEC will review the filing and send comments back to the company. SpaceX will then respond through amended S-1 filings that provide additional disclosures, clarify risk factors, update financial information, and sometimes reveal changes to offering terms.²

For investors, these amendments are often more important than the initial filing because they reveal what regulators, bankers, and institutional investors are focusing on.

Pay particular attention to:

● Changes in risk disclosures

● Lockup provisions

● Share structure

● Insider ownership

● Use of proceeds

● Any revisions to financial guidance

Next Comes the Roadshow

The roadshow is where SpaceX executives and the underwriting banks begin meeting with institutional investors around the world.

Think of it as Wall Street’s due diligence process in real time.

Management will spend the next several weeks explaining:

● Starlink growth

● Launch economics

● Government contracts

● AI initiatives

● Starship development

● Future profitability

● Long-term capital requirements

The objective is not simply marketing. The objective is determining how much demand exists and at what valuation.

Reports indicate the roadshow could begin as early as June 4–8, with pricing potentially occurring around June 11.³

This phase often tells us more than any earnings report.

Watch for Changes in the Price Range

One of the most important signals during the roadshow is whether the proposed offering range changes.

If investor demand proves stronger than expected:

● The price range may be increased

● More shares may be offered

● The valuation could move higher

If demand is weaker:

● The range may be reduced

● The offering size could shrink

Historically, IPOs that raise their pricing range during the roadshow tend to indicate significant institutional demand.

For a company as closely followed as SpaceX, any upward revision would likely signal extraordinary demand from both institutions and retail investors.

The Index Inclusion Story Could Matter More Than Most People Realize

One of the most interesting aspects of this IPO is the possibility of rapid index inclusion.

Nasdaq recently implemented accelerated inclusion rules for certain large-cap IPOs. Under those rules, a company of SpaceX’s size could potentially qualify for Nasdaq-100 inclusion far sooner than many previous IPOs.⁴

Why does that matter?

Because index inclusion creates automatic buyers.

If SpaceX enters major indexes:

● Index funds must purchase shares

● ETFs tracking those indexes must purchase shares

● Passive investment vehicles become long-term shareholders

This demand has nothing to do with investor opinion. It is mechanical.

For a company potentially approaching a $2 trillion valuation, those flows could be enormous.

Many investors underestimate how much stock demand can be generated simply because a company becomes part of the indexes millions of Americans own through retirement accounts and ETFs.

The Lockup Provisions May Be More Important Than The IPO Price

Most investors focus on the valuation.

I am far more interested in the lockup terms.

Traditionally, IPO investors and insiders face a 180-day lockup period before shares can be sold. However, recent reporting suggests SpaceX may utilize a staggered release structure that could permit certain shareholders to sell portions of their holdings earlier following earnings reports while maintaining longer restrictions for key insiders. Elon Musk reportedly remains subject to a substantially longer lockup period.⁵

For existing shareholders, this section of the prospectus deserves careful attention because it determines when additional supply could enter the market.

Supply matters.

Even great companies can experience temporary pressure when large blocks of shares become eligible for sale.

Expect Volatility

Many investors assume successful IPOs move in a straight line higher.

History suggests otherwise.

The first several months after an IPO are often dominated by:

● Institutional positioning

● Analyst initiations

● Lockup discussions

● Valuation debates

● Earnings expectations

SpaceX may ultimately become one of the largest companies in the world, but that does not mean the stock will move smoothly during its first year as a public company.

In fact, the first year may be one of the most volatile periods in the company’s history as public investors attempt to determine the appropriate valuation for:

● Starlink

● Launch services

● Defense contracts

● Starship

● Future AI initiatives

Volatility should be expected, not feared.

What Investors Should Focus On

The headlines will focus on:

● Elon Musk

● The IPO valuation

● The first-day trading pop

I believe there are more important questions.

Is Starlink becoming the financial engine investors hope it is?

According to reports surrounding the filing, Starlink generated more than $11 billion in revenue in 2025 and is increasingly viewed as the company’s primary profit center.⁶

How much capital will Starship require?

The future opportunity is enormous, but so are the capital requirements. Investors should pay close attention to management commentary regarding future investment needs and timelines.

Can SpaceX expand beyond rockets and satellites?

The filing reportedly highlights investments in AI initiatives, orbital computing infrastructure, and next-generation communications systems.⁷

Whether these become meaningful profit centers remains one of the most important long-term questions for investors.

How quickly will passive money enter the stock?

Index inclusion could become one of the most powerful drivers of demand during the first year following the IPO.

The faster SpaceX qualifies for major indexes, the greater the amount of automatic buying pressure from passive funds.

The Bottom Line

The S-1 filing marks the beginning of the public phase of the IPO process—not the end of it.

Over the next several weeks, investors should pay less attention to daily headlines and more attention to:

● Roadshow feedback

● Pricing range revisions

● Index inclusion developments

● Lockup provisions

● Institutional demand

The IPO price will generate the most headlines.

The answers to those questions will likely have a much greater impact on where the stock trades one year from now.

For existing shareholders, this is no longer simply an investment story. It is a wealth planning event. The company that was once difficult to access in private markets is about to enter one of the most scrutinized periods of its history. The investors who focus on structure, liquidity, and long-term positioning rather than short-term price movements will likely make the best decisions during the transition.

Next Steps:

If you had the foresight, access, and conviction to invest in SpaceX before it became one of the most valuable private companies in the world, the upcoming IPO represents far more than a market event, it represents a balance sheet event.

The most successful investors recognize that the work is not finished when an asset appreciates.

If you would value a thoughtful partner to help you and your family navigate this transition, simply reply to this email and we would be happy to arrange a conversation.

Sources

¹ MarketWatch, SpaceX has officially filed for its mammoth IPO
​ ​https://www.marketwatch.com/livecoverage/spacex-ipo-filing-prospectus-elon-musk/card/spacex-has-officially-filed-for-its-mammoth-ipo-i8PQqDikHBsmo9c6AskV​

² The Motley Fool, SpaceX IPO Timeline: Every Important Date Investors Need to Know
​ ​https://www.fool.com/investing/2026/04/27/spacex-ipo-timeline-every-important-date-need-know/​

³ Reuters, SpaceX accelerates IPO timeline, targets June pricing
​ ​https://www.reuters.com/world/spacex-accelerates-ipo-timeline-targets-june-11-pricing-nasdaq-2026-05-15/​

⁴ Business Insider, What the SpaceX IPO Means for Nasdaq and Index Inclusion
​ ​https://www.businessinsider.com/spacex-ipo-s1-spcx-stock-nasdaq-qqq-elon-musk-2026-5​

⁵ Wall Street Journal, SpaceX Staggers Lockup Releases for Investors

⁶ The Guardian, SpaceX Finances Revealed Ahead of Market Debut
​ ​https://www.theguardian.com/science/2026/may/20/spacex-finances-stock-market-debut​

⁷ The Verge, SpaceX Just Filed for What Could Be the Biggest IPO Ever​
​

This Market Is More Normal Than You Think

If you’ve felt uncomfortable investing lately, you’re not alone.

The S&P 500 is near all-time highs while headlines are dominated by geopolitical tension, inflation concerns, and uncertainty around interest rates. That combination feels contradictory, and many investors instinctively interpret it as a warning sign.

But historically, markets spending time at all-time highs is not unusual. It is, in many ways, the baseline condition of a growing economy.

Markets Hit Highs More Often Than You Think

Since 1950, the S&P 500 has delivered approximately 10–11% annualized returns ¹. Because of that long-term upward trend, new highs are not rare events, they are a recurring feature of normal market behavior.

• From 1950 through 2024, the S&P 500 has hit over 1,200 all-time highs²
• That averages to roughly 16–17 new highs per year over long periods
• During strong bull markets, those highs tend to cluster. For example:
  • 1995 alone saw 77 new all-time highs³
  • 2017 saw 62 new all-time highs⁴
  • 2021 saw over 70 new all-time highs⁵

These are not anomalies. They are periods when earnings growth, liquidity, and investor confidence align.

​
A market making new highs is not unusual, it is what a functioning, growing market is supposed to do.

Why All-Time Highs Don’t Equal a Bubble

A common mistake is assuming that high prices automatically mean irrational behavior.

Historically, bubbles are not defined by markets reaching new highs. They are defined by extreme disconnection between price and underlying fundamentals.

Example: The Dot-Com Bubble (Late 1990s)

• The Nasdaq peaked in March 2000 after rising over 400% in five years⁶
• Many companies had no earnings, and in some cases no revenue
• The S&P 500 traded at a forward P/E above 25x, while the Nasdaq traded even higher⁷
• Capital was flowing into speculative businesses with unproven models

When the bubble burst:

• The Nasdaq fell nearly 80% from peak to trough⁶
• Hundreds of companies went to zero

The collapse was not caused by high prices alone, it was caused by fragile underlying structure.

Why Today Looks Different (So Far)

Today’s market certainly has pockets of elevated valuation, particularly in AI-related stocks. but there are important differences:

• The largest companies driving the market (like Microsoft, NVIDIA, and Alphabet) are generating tens of billions in cash flow
• Corporate earnings overall are strong, with roughly 84% of S&P 500 companies beating earnings expectations this quarter⁸
• AI spending is not theoretical, it is translating into real revenue.

That does not mean the market is cheap. It means the current environment is being supported by actual earnings power, not just speculation.

Historical Perspective We Miss

Some of the strongest long-term returns in markets have come from investing during periods that felt uncomfortable at the time.

For example:

• Investors who stayed invested through the 1990s bull market participated in one of the strongest decades in history
• Investors who avoided markets after the 2008 financial crisis missed a more than 4x increase in the S&P 500 over the following decade⁹
• Even after major crises, markets have consistently gone on to reach new highs as earnings and economies recover

The Bottom Line

This market feels uncomfortable, but discomfort alone is not evidence of irrationality.

Historically, markets:

• spend significant time at or near highs
• reward long-term participation despite short-term uncertainty
• and move ahead of clarity, not after it

The reality is that “normal” markets often feel wrong in real time.

Waiting for market to feel comfortable can cost you.

Take The First Step:

If you are looking for a trusted partner on your investment journey, we encourage you to reach out. You can apply to be a client at this link.

Sources

¹ S&P 500 historical returns – NYU Stern (Damodaran)​
² Deutsche Bank / Bloomberg data on S&P 500 all-time highs
³ 1995 market data – S&P Dow Jones Indices
⁴ 2017 record highs – CNBC market analysis
⁵ 2021 record highs – Reuters market recap
⁶ Nasdaq dot-com crash data – Federal Reserve / historical charts​
⁷ S&P 500 valuation history – Multpl​
⁸ FactSet Earnings Insight
⁹ S&P 500 total return post-2008 – S&P Global / Morningstar data

The Ground Is Shifting for California PI Lawyers. Here’s How to Protect What You’ve Built.

For more than a decade, California personal injury lawyers have operated in a uniquely favorable environment. Lax regulations, generous insurance minimums, and a thriving contingency model created enormous earnings potential. Many firms built serious wealth on the back of large settlements and stable economics.

That landscape is changing.

Major Legal Shifts Are Coming

A new initiative has been filed for California’s 2026 ballot that would significantly reshape auto-injury cases. The proposal would require that accident victims keep at least 75% of total recoveries after fees, effectively capping attorney compensation on contingency cases. It also aims to tie recoverable medical expenses to Medicare and Medi-Cal benchmarks and restrict referral arrangements between lawyers and medical providers.

In parallel, recent legislative deals have lowered certain mandatory insurance minimums for rideshare accidents. If approved, these changes will likely shrink the available pool for settlements and alter case economics across the board.

Individually, these shifts may seem incremental. Together, they signal a clear direction: less fee flexibility, smaller settlements, and heightened scrutiny on the financial structure of personal injury work.

Why This Matters

Many PI practices are built on high fixed costs and aggressive case pipelines. Marketing budgets, staffing, referral fees, and draw distributions are structured around today’s margins. If fee caps and insurance changes squeeze revenue, firms with little liquidity or financial structure will feel it first.

Contingency income is inherently uneven. You may have exceptional years followed by quieter ones. Until now, California’s environment has softened those cycles. That cushion is thinning.

Where Financial Strategy Comes In

This is the moment to get more intentional about the wealth you’ve already built.

• Liquidity: Maintaining meaningful reserves outside of the firm can help stabilize income in leaner years without forced drawdowns or rushed settlements.
  ​
  ​
• Structure: Separating firm cash flow from personal wealth through thoughtful entity design, retirement plans, and asset-protection strategies can create long-term security regardless of legal reforms.
  ​
  ​
• Tax efficiency: Large contingency fees often come with large tax bills. Planning ahead allows you to manage and, where appropriate, defer taxation in a way that aligns with your practice cycle.
  ​
  ​
• Scenario planning: Stress-testing your financial plan against possible legislative outcomes ensures you’re not blindsided if caps or reimbursement limits change faster than expected.
  ​
  ​

A Moment to Act, Not Panic

None of this is meant to sound alarmist. The reality is that the California PI space has been extraordinarily lucrative for years. But relying on a status quo that’s clearly evolving is risky. The firms and individuals who thrive in the next chapter will be those who treat their personal financial planning with the same discipline they bring to their cases.

Take the First Step

If you want to understand how these shifts could impact your personal financial picture and firm cash flow, schedule a Wealth Design Session by emailing us at info@maddahiwealth.com. We’ll walk through your current structure, stress test it against potential reforms, and build a clear strategy to secure what you’ve earned.

​
​

The Ground Is Shi

fting for California PI Lawyers. Here’s How to Protect What You’ve Built.

For more than a decade, California personal injury lawyers have operated in a uniquely favorable environment. Lax regulations, generous insurance minimums, and a thriving contingency model created enormous earnings potential. Many firms built serious wealth on the back of large settlements and stable economics.

That landscape is changing.

Major Legal Shifts Are Coming

A new initiative has been filed for California’s 2026 ballot that would significantly reshape auto-injury cases. The proposal would require that accident victims keep at least 75% of total recoveries after fees, effectively capping attorney compensation on contingency cases. It also aims to tie recoverable medical expenses to Medicare and Medi-Cal benchmarks and restrict referral arrangements between lawyers and medical providers.

In parallel, recent legislative deals have lowered certain mandatory insurance minimums for rideshare accidents. If approved, these changes will likely shrink the available pool for settlements and alter case economics across the board.

Individually, these shifts may seem incremental. Together, they signal a clear direction: less fee flexibility, smaller settlements, and heightened scrutiny on the financial structure of personal injury work.

Why This Matters

Many PI practices are built on high fixed costs and aggressive case pipelines. Marketing budgets, staffing, referral fees, and draw distributions are structured around today’s margins. If fee caps and insurance changes squeeze revenue, firms with little liquidity or financial structure will feel it first.

Contingency income is inherently uneven. You may have exceptional years followed by quieter ones. Until now, California’s environment has softened those cycles. That cushion is thinning.

Where Financial Strategy Comes In

This is the moment to get more intentional about the wealth you’ve already built.

• Liquidity: Maintaining meaningful reserves outside of the firm can help stabilize income in leaner years without forced drawdowns or rushed settlements.
  ​
  ​
• Structure: Separating firm cash flow from personal wealth through thoughtful entity design, retirement plans, and asset-protection strategies can create long-term security regardless of legal reforms.
  ​
  ​
• Tax efficiency: Large contingency fees often come with large tax bills. Planning ahead allows you to manage and, where appropriate, defer taxation in a way that aligns with your practice cycle.
  ​
  ​
• Scenario planning: Stress-testing your financial plan against possible legislative outcomes ensures you’re not blindsided if caps or reimbursement limits change faster than expected.
  ​
  ​

A Moment to Act, Not Panic

None of this is meant to sound alarmist. The reality is that the California PI space has been extraordinarily lucrative for years. But relying on a status quo that’s clearly evolving is risky. The firms and individuals who thrive in the next chapter will be those who treat their personal financial planning with the same discipline they bring to their cases.

Take the First Step

If you want to understand how these shifts could impact your personal financial picture and firm cash flow, schedule a Wealth Design Session by emailing us at info@maddahiwealth.com. We’ll walk through your current structure, stress test it against potential reforms, and build a clear strategy to secure what you’ve earned.

​
​

The Ground Is Shifting for California PI Lawyers. Here’s How to Protect What You’ve Built.

For more than a decade, California personal injury lawyers have operated in a uniquely favorable environment. Lax regulations, generous insurance minimums, and a thriving contingency model created enormous earnings potential. Many firms built serious wealth on the back of large settlements and stable economics.

That landscape is changing.

Major Legal Shifts Are Coming

A new initiative has been filed for California’s 2026 ballot that would significantly reshape auto-injury cases. The proposal would require that accident victims keep at least 75% of total recoveries after fees, effectively capping attorney compensation on contingency cases. It also aims to tie recoverable medical expenses to Medicare and Medi-Cal benchmarks and restrict referral arrangements between lawyers and medical providers.

In parallel, recent legislative deals have lowered certain mandatory insurance minimums for rideshare accidents. If approved, these changes will likely shrink the available pool for settlements and alter case economics across the board.

Individually, these shifts may seem incremental. Together, they signal a clear direction: less fee flexibility, smaller settlements, and heightened scrutiny on the financial structure of personal injury work.

Why This Matters

Many PI practices are built on high fixed costs and aggressive case pipelines. Marketing budgets, staffing, referral fees, and draw distributions are structured around today’s margins. If fee caps and insurance changes squeeze revenue, firms with little liquidity or financial structure will feel it first.

Contingency income is inherently uneven. You may have exceptional years followed by quieter ones. Until now, California’s environment has softened those cycles. That cushion is thinning.

Where Financial Strategy Comes In

This is the moment to get more intentional about the wealth you’ve already built.

• Liquidity: Maintaining meaningful reserves outside of the firm can help stabilize income in leaner years without forced drawdowns or rushed settlements.
• Structure: Separating firm cash flow from personal wealth through thoughtful entity design, retirement plans, and asset-protection strategies can create long-term security regardless of legal reforms.
• Tax efficiency: Large contingency fees often come with large tax bills. Planning ahead allows you to manage and, where appropriate, defer taxation in a way that aligns with your practice cycle.
• Scenario planning: Stress-testing your financial plan against possible legislative outcomes ensures you’re not blindsided if caps or reimbursement limits change faster than expected.

A Moment to Act, Not Panic

None of this is meant to sound alarmist. The reality is that the California PI space has been extraordinarily lucrative for years. But relying on a status quo that’s clearly evolving is risky. The firms and individuals who thrive in the next chapter will be those who treat their personal financial planning with the same discipline they bring to their cases.

Take the First Step

If you want to understand how these shifts could impact your personal financial picture and firm cash flow, schedule a Wealth Design Session by emailing us at info@maddahiwealth.com. We’ll walk through your current structure, stress test it against potential reforms, and build a clear strategy to secure what you’ve earned.

​
​

At various points in 2023 and 2024, the “Magnificent 7” were responsible for well over half of the S&P 500’s total return. In 2023 alone, they contributed roughly 60%–70% of the index’s gains, and their earnings growth dramatically outpaced that of the remaining 493 companies. By market capitalization, this group grew to represent close to 30% of the S&P 500, an unusually high level of concentration for a broad market index.¹

That kind of dominance is powerful, but it can also create a dangerous illusion: the feeling that concentration is the same thing as skill.

Markets, however, move in cycles. Periods when leadership is narrow have historically been followed by stretches in which performance broadens across sectors and investment styles. In the late 1990s, technology stocks drove most index returns. By the early 2000s, leadership shifted sharply, and diversified investors were far better positioned than those heavily concentrated in a single theme. The lesson is not that today’s leaders will fail. The lesson is that extreme concentration rarely lasts forever.²

When I refer to “boring” portfolios, I do not mean outdated or passive. I mean portfolios grounded in enduring principles: broad diversification across sectors and asset classes, exposure beyond the largest growth companies, attention to valuation, and discipline during both optimism and fear. These portfolios are not built to win every quarter. They are built to survive and compound for decades.

Equal-weighted versions of the S&P 500 have periodically outperformed the traditional market-cap-weighted index after stretches of heavy concentration. That outperformance often occurs when leadership rotates and previously overlooked sectors regain momentum. In other words, diversification tends to feel unnecessary at the peak of enthusiasm, yet it becomes invaluable when sentiment shifts.³

The hidden risk of concentration is not simply volatility. It is fragility. When too much of a portfolio’s success depends on too few outcomes, the margin for error narrows. Valuation risk rises as expectations grow. Sentiment risk increases as earnings must be not just strong, but nearly perfect. Portfolio risk intensifies because one narrative carries disproportionate weight.

None of this suggests abandoning high-quality companies or avoiding innovation. Many of these businesses are profitable, dominant, and transformative. The point is not to predict their decline. It is to recognize that strength and safety are not the same thing. A stock can be strong and still expose a portfolio to unnecessary imbalance.

Diversification is emotionally difficult precisely when it is most important. It requires owning sectors that are not currently exciting, accepting returns that may not look spectacular in the short term, and trusting a disciplined process rather than crowd enthusiasm. That approach rarely makes headlines, but historically it has been one of the most reliable paths to durable wealth.

Over full 10- and 20-year periods, diversified equity portfolios have delivered annualized returns in the range of roughly 8%–12%, depending on the starting point and economic environment. The investors who achieved those outcomes were not consistently chasing the most concentrated theme of the moment. They were allowing time, rebalancing, and broad exposure to work together.⁴

There will always be moments when a narrow group of stocks captures the world’s attention. Some of those moments will be justified. Some will last longer than skeptics expect. But the investors who ultimately reach financial independence are rarely those who relied on a single theme to carry them. They are the ones who allowed diversification, discipline, and time to quietly compound in the background.

If you are thinking about concentration risk, portfolio structure, or how to position your wealth for the next decade rather than the next headline, this is exactly the work we do inside a Wealth Design Session. Because the portfolios that endure are rarely the most exciting ones. They are the ones designed to keep working long after enthusiasm fades.

Warmly,
Roxana

Markets don’t panic over noise, they panic over oil. Over the past 2 weeks, investors were reminded that one of the most of the oil in the world passes through an important chokepoint; a narrow strip of water called the Strait of Hormuz.

What Is the Strait of Hormuz?

The Strait of Hormuz connects the Persian Gulf to the Gulf of Oman and the Arabian Sea. It is one of the most strategically important energy corridors on earth.

Roughly 18–20 million barrels of oil per day, about 20–25% of global seaborne oil trade, pass through it.**¹

That includes exports from Saudi Arabia, the UAE, Kuwait, Iraq, and Iran.

There is no realistic alternative route capable of replacing that volume.²

When one-quarter of the world’s oil moves through a single narrow passage, even the threat of disruption moves markets.

What Happened Last Week?

Several developments pushed investors into a more cautious stance:

• Iran conducted military drills in the Strait and temporarily restricted sections of the waterway.³
• Diplomatic negotiations between the U.S. and Iran remain fragile, with continued military positioning in the region.⁴
• Oil prices climbed to multi-month highs as traders priced in geopolitical risk.⁵
• Stocks softened during moments of escalation, while gold attracted safe-haven flows.⁶

Importantly, there has been no sustained disruption of oil supply.

But markets are forward-looking. Rather than waiting for supply to stop, they price in the probability that it might.

Why Oil Reacts So Quickly

Energy markets operate on expectations.

When tensions rise:

• Traders build in a “risk premium” to crude oil prices.⁵
• Insurance costs for tankers increase.
• Volatility rises across commodities and equities.

Analysts have warned that a serious or prolonged closure could push oil well above $100 per barrel due to how much global supply depends on Hormuz.⁷ Higher oil feeds into transportation costs, corporate margins, inflation expectations, and of course, the stock market⁸

Could Iran Actually Close It?

Technically, Iran has influence over the northern side of the strait. But a sustained closure would be economically painful for Tehran itself. Its own oil exports rely on that same channel.²

Alternative pipelines cannot fully offset the volume that moves through Hormuz.²

Most geopolitical analysts believe a long-term closure would invite severe international retaliation and create economic damage that would be difficult for Iran to absorb.⁹

The greater risk is not permanent closure, it is temporary disruption, uncertainty, and miscalculation.

The Calm Perspective

Markets are not reacting to an actual collapse in energy supply; rather, they are responding to heightened uncertainty. At this stage, oil prices have moved higher, risk assets have experienced periods of weakness, and safe-haven assets have attracted increased investor flows. However, this situation reflects a geopolitical risk premium being priced into markets, not the onset of a structural global energy crisis.

The key variable to monitor is not solely military positioning in the region, but the direction of diplomacy. If tensions begin to ease, oil prices could decline just as quickly as they rose. Conversely, if tensions escalate in a meaningful way, market volatility would likely increase.

Until clearer signals emerge, markets are doing what they typically do when geopolitics becomes a factor; they are assigning probabilities to potential disruption and adjusting prices accordingly. And in moments like this, the market’s pricing of risk can sometimes appear more dramatic than the underlying risk itself.

But there is another major player watching this very closely.

China.

Over the past several days, as strikes and retaliatory attacks involving Iran have intensified, global markets have focused on oil prices and shipping risks. But the deeper strategic implications may revolve around China’s relationship with Iran and what happens if the country becomes unstable or undergoes political change.

Let’s discuss the economic relationship between China and Iran in order to understand why this matters.

​

Why China and Iran Are Economically Linked

China is Iran’s largest trading partner. The relationship is built primarily on oil.

Because Iran has been under heavy US sanctions for decades, many Western countries cannot legally buy its oil. China has stepped in as the main buyer. Estimates suggest that roughly 80 to 90 percent of Iran’s oil exports go to China, often at a discount due to sanctions pressure.¹

For China, this has been a strategic win. It gets access to cheaper oil and diversifies its energy supply away from US-aligned producers.

In 2021, the two countries signed a 25-year cooperation agreement outlining potential Chinese investment in Iranian energy, transportation, and infrastructure in exchange for long-term oil supply agreements.² However, many of those investments have moved more slowly than headlines initially suggested. China has been cautious³, and that caution now looks strategic.

What Has Changed Over the Past Few Days

The recent escalation has introduced three new risks that China did not have to price in just a week ago.

First, physical infrastructure risk.

Strikes targeting Iranian military and industrial facilities have raised concerns about damage to energy infrastructure. While Iran’s oil production has not collapsed, markets are now pricing in the possibility that production or export terminals could be disrupted if the conflict expands.

Second, shipping risk through the Strait of Hormuz.

The Strait of Hormuz carries roughly 20 percent of the world’s oil supply.⁴
Even temporary threats to shipping lanes or insurance markets can disrupt flows. Energy traders have already begun factoring higher geopolitical risk premiums into oil prices.

For China, this matters directly. A large share of the Iranian crude it imports travels through this narrow waterway.

Third, internal instability.

If prolonged conflict weakens Iran’s leadership or triggers widespread unrest, the possibility of internal political change increases. That does not automatically mean revolution, but it introduces a level of uncertainty that China historically prefers to avoid.

What Changes If Iran Remains Politically Unstable

If Iran experiences prolonged unrest or leadership change, China faces several strategic risks.

First, oil disruption.

China relies on steady energy flows. If production falls or shipping becomes unpredictable, China would need to replace Iranian supply quickly.

Second, political realignment.

If a future Iranian government seeks stronger relations with Europe or the United States, Iran could rebalance its economic partnerships. China would likely remain an important buyer, but it could lose preferential treatment or discounted pricing.

Third, strategic credibility.

China presents itself globally as a steady partner that does not interfere in domestic politics. If Iran collapses or dramatically changes leadership, China’s long-standing partnership could appear less durable than it once seemed.

What China Is Likely To Do

China’s foreign policy is historically pragmatic rather than ideological. In the current situation, Beijing has taken a predictable position: calling for restraint and de-escalation while avoiding direct involvement. China is unlikely to get militarily involved.

Instead, it will likely:

• Continue calling for diplomatic restraint
• Quietly diversify oil supply through Saudi Arabia, Russia, and other producers
• Delay large scale investment projects until Iran’s political direction becomes clearer

China already imports significant oil from Saudi Arabia, Russia, and Iraq.⁵
Those alternatives reduce the urgency of relying on Iranian supply during instability.

The Bigger Picture

China’s relationship with Iran has never been ideological, it has been transactional; Cheap oil in exchange for economic engagement. Now that Iran faces external military pressure and potential internal instability, China’s approach will likely remain consistent.

Avoid direct confrontation with the United States, protect their oil imports and stay flexible until the political outcome becomes clearer.

The real question is not whether China supports Iran, it’s whether Iran remains stable enough to be worth supporting.

I would love to know what you thought about this article, and what you think about how this conflict could affect markets in 5, 10, or 20 years. I read all of your responses!

For decades, one geopolitical flashpoint had the power to rattle the entire global economy; The Strait of Hormuz.

It is a narrow shipping corridor between Iran and Oman, which carries roughly 20 million barrels of oil per day, representing about 20% of global petroleum supply.¹ When conflict threatens this route, markets notice immediately.

Historically, disruptions to energy supply have triggered some of the most dramatic economic shocks in modern history. The 1973 oil embargo quadrupled energy prices. The Iranian Revolution in 1979 sent inflation surging across the developed world. Even the Gulf War in 1990 caused oil prices to spike sharply.

So when tensions in the Middle East escalate and shipping through Hormuz slows, investors instinctively expect the same outcome. We expect oil to surge (it’s up about 50%), inflation to return and for stocks to fall.

Yet something interesting is happening today. Oil prices have risen, but equity markets have remained relatively resilient. Instead of panic, markets are responding with measured volatility. The reason is a structural shift that has quietly reshaped the global energy landscape.

The Shale Revolution Changed Everything

Twenty years ago, the United States was heavily dependent on foreign oil. In the mid-2000s, U.S. crude production hovered around five million barrels per day. Today, the country produces roughly 13.5 million barrels per day, making it the largest oil producer in the world.² This transformation was driven by the shale revolution.

Advances in horizontal drilling and hydraulic fracturing unlocked enormous reserves in places like the Permian Basin in Texas and New Mexico, dramatically increasing domestic supply.³ In practical terms, this means the United States now has far greater control over its own energy destiny.

When oil prices rise, American producers benefit. Domestic energy companies generate higher revenues, which helps offset the broader economic impact of higher fuel costs. In earlier decades, rising oil prices were purely a tax on the U.S. economy, byt today, they are partially a profit center.

A Different Economy Than the One That Faced the Oil Shocks

Another reason markets are reacting differently is the structure of the modern economy. In the 1970s, manufacturing and heavy industry dominated economic output. These sectors were highly sensitive to energy prices. Today’s economy looks very different.

Technology, software, and services make up a much larger share of GDP and stock market value. In fact, technology alone accounts for roughly one-third of the S&P 500. Energy companies, by comparison, represent only a small portion of the index. The result is that oil price spikes still matter, but they no longer hit the economic engine as directly as they once did.The United States also produces more economic output per unit of energy than it did decades ago, meaning each barrel of oil supports significantly more economic activity.

Strategic Reserves Add a New Shock Absorber

There is another important tool that did not exist during earlier energy crises: strategic petroleum reserves. Following the oil shocks of the 1970s, the United States and other developed nations built massive emergency stockpiles designed to stabilize supply during disruptions. These reserves allow governments to release oil into the market during geopolitical crises, helping smooth temporary shortages and calm price spikes.

Recent coordinated releases from strategic reserves around the world demonstrate how this mechanism can soften supply shocks when major shipping routes are threatened.

Markets Are Pricing Risk, Not Collapse

The key distinction in today’s market environment is that investors are reacting to uncertainty rather than a full supply breakdown. Despite tensions around the Strait of Hormuz, oil is still moving, just way more slowly and with higher insurance costs. Tanker traffic has declined significantly, but the global energy system has not stopped functioning.

Markets tend to react dramatically to actual supply collapses. But when the situation is uncertain and fluid, prices adjust gradually as probabilities change. For now, oil markets appear to be pricing a risk premium, not a structural shortage.

The Variable That Matters Most

Ultimately, the global economy hinges on one question: Does the Strait of Hormuz remain partially disrupted, or does it close completely for an extended period?

If the strait were shut for weeks or months, the impact would be profound. Roughly one-fifth of the world’s oil supply would need to find alternate routes or replacement sources.¹ That scenario would likely push oil prices sharply higher and reintroduce inflation pressures just as central banks were beginning to regain control. But if shipping resumes or tensions ease, energy markets could normalize surprisingly quickly. Oil shocks have a long history of reversing as rapidly as they appear.

The Quiet Lesson for Investors

Periods of geopolitical tension often feel like moments when markets should fall apart, but history repeatedly shows that the global economy is more adaptable than headlines suggest. Energy markets evolve, supply chains re-route and production adjusts.

The shale revolution has fundamentally altered the balance of power in global energy, and it is one of the reasons the market’s reaction today looks very different from the oil shocks of the past.

In this moment of global stress, the United States has become more central, not less.

Let’s break that down;

When tensions rise in the Middle East, the first thing the world worries about is oil. In this current war, we are dealing with Iran’s closure of the straight of Hormuz where roughly 20% of global oil supply flows through.¹

Even if the strait isn’t fully closed, the risk that Iran can close it increases shipping costs, insurance premiums, and delays. That tightens supply and pushes prices higher.

In the 1970s, this would have crippled the U.S. economy, but not today…

The U.S. is now one of the largest oil producers in the world, thanks to the shale boom.² That means when global oil prices rise, the U.S. doesn’t just absorb the pain, it participates in the upside.

At the same time, Europe is still rebuilding its energy strategy after the Russia-Ukraine war and has become increasingly reliant on U.S. energy exports.³

So higher oil prices don’t just create inflation pressure. They also increase America’s leverage in global energy markets. In periods of conflict, the global system naturally gravitates toward stability, and the United States continues to serve as its primary anchor.

That becomes especially clear when you look at China.

China is the world’s largest importer of crude oil, and a significant portion of that supply comes from the Middle East.⁴ China does not possess the same global military infrastructure to safeguard those routes, especially in high-risk regions such as the Persian Gulf.

So when tensions rise the U.S. protects trade routes and China is forced to depend on them. It changes the landscape from simply a military difference to a power structure difference.

This dynamic also strengthens alliances.

After Russia invaded Ukraine, countries rallied around NATO and increased defense spending.⁵ Similar patterns are emerging now.

When risk rises, allies coordinate more closely, defense budgets increase and security dependence on the U.S. deepens. As a result, U.S. defense companies can see increased demand. U.S. Treasury bonds become a “safe haven.” And global capital often flows into the U.S. dollar during uncertainty.⁶

None of this means the situation is “good.​

War brings real consequences; human loss, economic strain and inflation risks. il spikes can ripple into higher costs across transportation, food, and everyday goods. Markets can become volatile in the short term.

But from a structural standpoint, the key idea is that power isn’t measured in calm environments, it’s revealed during stress.

Historically, during periods of global stress, the U.S. system (its markets, its military, and its currency) have all proven to be the place the world gravitates toward. arkets are not just reacting to the event, they are pricing who is most resilient through the event.

I am always here to remind you that short-term fear is loud, but long-term positioning is quiet. The investors who win over time are the ones who understand the difference.

Take the First Step

If you want a partner to help you navigate your investments in this ever-changing economic landscape, we invite you to send us an email to set up a consultation.