NOBODY EXPECTS AN ASTEROID TO HIT THEIR HOUSE
The old joke goes that risk is a four-letter word, and one of the nastiest varieties is exogenous risk. By definition, a risk that it is out of the normal course of events, is unexpected, unanticipated and is extremely hard to guard against, is exogenous. Think about an asteroid hitting your house, or a mutated virus from China changing your life for two years. In the investment business, exogenous risks upset our expectations and can quickly become more important than things we normally spend our time thinking about, like company earnings, industry trends, and the state of the economy. So let’s talk about helium.
If you’re like me, when someone says helium, you immediately think of party balloons, floating above the crowd and tethered to a child by a coloured ribbon. Over the past couple of weeks, I have been educated. It turns out that helium is an absolutely essential industrial gas, used in all kinds of crucial processes. For example, you cannot make microchips without helium. You cannot run MRI machines without liquid helium, which acts as a coolant. Fiber-optic cables can only be manufactured in the pure, inert atmosphere created by helium. Running out of helium would be a very bad thing for some very big companies.
When the war in Iran started, I don’t think a lot of people were thinking about helium, but it turns out that Qatar produces about 30% of all industrial helium. When Iran bombed the main Qatari production facility, knocking it offline for a minimum of two years, the price of helium immediately jumped by 40% to 100%. This is what is known as a “first order” effect – the obvious consequence of the newly-created shortage. The second order effects are now being seen in lower production and consequent shortages of some kinds of semiconductors, and an increase in their prices. The third order effect will be an increase in the cost of things like iPhones, computers, and cars, all of which use lots and lots of microchips, as companies pass the increased price of the chips on to consumers.
Many of our clients own shares in Taiwan Semiconductor, one of the most important chip makers in the world. Most of our clients own shares in Amazon, which runs huge data centres and consumes millions of chips. Similarly, most own shares of Apple, which has seen its input costs rise for all of its products. All these major companies, and too many others to mention, have had their businesses impacted in a huge way by exogenous risk.
While the war in Iran was quite widely anticipated, I don’t think very many analysts expected Iran to bomb its neighbours in the Emirates, Kuwait, and Saudi Arabia. How many trucking companies and airlines thought that the price of jet fuel would rise by 85% and diesel fuel by more than 50%? We don’t know how long the Strait of Hormuz will remain closed, nor how much more damage will be done to the petrochemical infrastructure in the Persian Gulf region, but we do know that the second and third order effects are coming. We now know that price-driven inflation will certainly rise far above the targets set by central bankers in North America and Europe, and as a result, interest rates will stay higher for longer.
History shows that while the immediate impact of exogenous risk can be highly disruptive and unpleasant, generally the effects are not long lasting. Companies adapt, as do consumers. Higher prices bring new producers into the market and inspire changes in behaviour. For example, the OPEC oil boycott of 1973-74 caused global oil prices to quadruple, but in the end, led to more efficient cars, conservation measures, and reduced reliance on OPEC suppliers. Medium term pain led to long term gain.
With the end of March, we are about to enter company earnings season, in which we will see results for the first quarter and companies will talk about their expectations for the rest of the year. We know, from experience, that earnings are more important than anything else in determining the value and stock prices of public companies. Investors need to look past the short-term impact of the Iran war. Great companies adapt and patient shareholders are rewarded.
Media Appearances
Ernest Wong on BNN Bloomberg’s Investor Outlook – March 5, 2026
Benjamin Klein on BNN Bloomberg’s Morning Markets – March 18, 2026
Barry Schwartz on BNN Bloomberg’s The Street – March 23, 2026
Podcast
Netflix’s $2.8B Money Heist – March 10, 2026