Payden & Rygel: Political regime change may not result in a regime shift for macro and markets

Payden & Rygel: Political regime change may not result in a regime shift for macro and markets

March 2, 2026

The joint airstrikes by the United States and Israel on Iran have sharply increased geopolitical risks for financial markets. Although the military operation has fuelled speculation about a possible regime change in Tehran, political regime change does not automatically imply a fundamental shift for the global economy or financial markets, according to Payden & Rygel. 

The asset manager identifies four underlying factors supporting this view:

  1. Geopolitical events tend to have short-lived market impacts, which present buying opportunities.
  2. The primary avenue for macro contagion would be sustained oil supply bottlenecks in the Strait of Hormuz, but only 2% of oil passing through the strait goes to the U.S.
  3. Geopolitics incites volatility in equities more than in bonds.
  4. It would require a fundamental shift in energy prices to alter the macro view that the oil tail risk scenario is a downside risk to growth rather than an inflation story.