Hot war in Hormuz: the portfolio rebuild

Happy Saturday one and all!

Brian McGleenon here,

Well, it looks like it has all kicked off again this week in the Strait of Hormuz, and Washington finds itself in a state of consternation: neither the promise of economic relief nor the threat of military punishment has, so far, made Iran toe the line.

Markets wobbled rather than crashed: Brent briefly topped $80, the Dow shed more than 570 points, yields climbed toward 4.6%, and gold, down over 20% since the war began, caught a modest bid. The question for July is whether the danger is already in the price.

Here’s how five of the most closely watched names in markets say they’re positioning.

The renowned economist, known as Dr Doom, has positioning logic built around energy and stagflation risk rather than a fixed asset mix. He has argued throughout this war that markets are underpricing the tail risk of a prolonged conflict: if escalation fails and Iran retains the ability to block Hormuz or strike Gulf oil infrastructure, the world “ends up in 1970s stagflation,” a scenario he says is not his baseline but is a tail risk markets have not fully priced.

His deeper thesis is that this conflict is not a temporary supply shock but the catalyst for a structural macro shift, higher real rates combined with a weaker dollar that could ultimately drive oil toward $200 a barrel and support commodity prices for years.

The portfolio translation: overweight energy, real assets and inflation-protected instruments; underweight long-duration bonds and richly valued cap-weighted equities. But Roubini is not a pure bear. He describes a “tug-of-war” between stagflationary geopolitical shocks and growth driven by the global AI and tech boom, and does not expect a US or global recession. His outlook supports keeping a meaningful allocation to AI-linked equities alongside stagflation hedges, rather than abandoning growth altogether.

The SkyBridge Capital founder is the most aggressive of the five, anchoring his portfolio in crypto despite a brutal stretch for the asset class.

“I have about 30% in Bitcoin,” Scaramucci said, a striking commitment given that US spot Bitcoin ETFs recorded $95.3 million in net outflows on July 9 alone and have just posted their worst quarter of outflows on record, with Bitcoin itself trading around $62,000 and behaving more like a risk asset than a haven during this crisis.

Beyond crypto, Scaramucci holds a basket of AI companies: “I own Astera Labs publicly, SpaceX privately. I always own a slug of the S&P,” he added. On equities more broadly, he sees the market widening out: the Magnificent 7 has had its run, but the other names in the index are doing well this year, an argument for equal-weight or broad S&P exposure over concentrated mega-cap tech. Rounding out the portfolio, he’d hold some real estate and some gold, the traditional inflation and instability hedges sitting alongside his high-conviction digital-asset bet.

Dalio is the most explicit on weightings. The Bridgewater founder has repeatedly urged investors to hold between 5% and 15% of their portfolios in gold, calling it an “effective diversifier” and essential insurance against geopolitical and systemic financial instability. Notably, he has stuck to the call even as gold fell more than 10% since the war began — for Dalio, the war is noise and the signal is the steady erosion of dollar hegemony, with the real tailwind coming from the growth of transactions outside the dollar system.

He advises against trying to time a bottom: hold gold as a permanent anchor via ETFs or miners, capped in size because it produces no income. He also keeps roughly 1% in bitcoin and has previously suggested a combined 15% in bitcoin or gold. His broader message is that the assumptions underpinning three decades of portfolio construction, stable inflation, predictable policy, expanding globalization, are no longer reliable: investors should evolve beyond traditional stock-bond diversification, raise allocations to real assets like commodities and infrastructure as inflation hedges, and prioritize liquidity so positions can be adjusted quickly when sudden repricing events hit.

In his view, the US economy is already showing classic stagflation signs, and diversification is no longer optional; it’s a necessity.

El-Erian’s stance is defensive and surgical. The former PIMCO CIO says he is avoiding broad-based stock indexes as the war grinds on, describing his own journey from reduced risk to “maximum risk-off,” with only a few individual names looking attractive.

His fear is sequential: an energy shock becomes an interest-rate shock, then a broader inflation shock, then a demand shock as consumers, especially lower-income households, pull back, and if the conflict persists, financial instability. Anyone buying stocks here, he warns, is buying a lot of volatility and has to be able to underwrite it.

Where he is deploying capital: discounted AI stocks with horizontal and vertical integration, companies he believes can manage this turbulence and where he can leave money invested for a very long time, and gold, which he views as attractive long-term now that the sell-off has flushed speculators out of the market while central-bank buying keeps the fundamental case intact.

El-Erian’s also warns that the Iran shock does not act alone: stress in private credit, a potential AI bubble, and a bond market straining to absorb new government debt supply can compound into a self-reinforcing destabilizing force, an argument for genuine liquidity buffers rather than reaching for yield.

The DoubleLine CEO has offered the most numerically ordered allocation of the five, laid out explicitly in response to the oil spike from the US strikes on Iran: 40% equities, 30% fixed income, 15% commodities and real assets, and 15% “dry powder,” but pointedly not in cash.

Within equities, he dislikes momentum and cap-weighted US indexes and favors emerging-market stocks held in local currencies, because he expects the dollar to keep deteriorating. In fixed income, he suggests 20% in a low-risk total-return bond vehicle with no corporate credit, a deliberate way to hide from strains in corporate lending, plus 10% in local-currency emerging-market debt, while recommending against overweighting 30-year Treasurys. His commodity sleeve splits into 10% gold and 5% in a broad commodity basket, on the logic that central banks will keep diversifying away from dollars and supporting the gold price; he expresses the view through miners, and sees junior gold miners as potential takeover targets.

The 15% dry powder sits in low-duration and flexible-income funds with a blended yield near 4.9%, better than cash, but liquid enough to deploy when the next dislocation arrives. He also warns inflation could easily reach the mid-3% range by year end given the oil shock.

Strip away the differences in style and five distinct portfolios converge on a handful of themes. Every one of these investors holds gold or hard assets as the core geopolitical hedge, even though gold has confounded the textbooks by falling through much of this war. Four of the five are openly skeptical of cap-weighted US index exposure, preferring the broader market, quality names, or emerging markets. All of them keep a growth engine running through AI-linked equities, betting the tech boom outlasts the missiles. And nearly all emphasize liquidity. Gundlach’s dry powder, El-Erian’s risk-off posture, Dalio’s stress on being able to move fast — in a war where each headline can add or erase a $10 oil-risk premium overnight, the ability to reposition may matter more than the starting position.

Before you go: if the crypto leg of these portfolios has you puzzled, Scaramucci holding 30% Bitcoin into the worst quarter of ETF outflows on record, this week’s podcast pick is for you. Paul Howard, Senior Director at market-making giant Wincent, argues from the trading desk that the weeks-long crypto bleed is not what most people think it is: not a structural crack, but liquidity rotating out to chase IPOs, AI, and the SpaceX listing. It’s a view from inside the money flows that pairs neatly with everything above. Full details below.

The market has been bleeding for weeks, and most people are reading it wrong. Paul Howard, Senior Director at Wincent, one of the world’s largest HFT market-making crypto funds and OTC liquidity providers, argues from the trading desk that this pullback reflects no structural crack in crypto at all, but liquidity draining out to chase IPOs, AI, and the SpaceX listing, which is pulling money straight out of crypto ETFs.

He cautions we may not be at the bottom yet, with historical four-year drawdowns of around 60 percent framing what could come next, yet believes the longer-term picture still points up. Along the way he covers prediction markets’ breakout moment (with the World Cup as a potential catalyst), why MiCA is a positive step for Europe despite some firms pulling back, why 200 stablecoins will consolidate down to just four or five, and why the Clarity Act could send yield-seeking money on-chain.

The episode is part of the BeInCrypto Expert Council, bringing you exclusive insights from top industry leaders on markets, trading, and the future of digital assets. Read more about the council here.