This article first appeared in the AFR on 19 April 2026
There have been two main topics dominating the headlines so far this year – the disruption caused by artificial intelligence and the war in Iran.
Their influence on markets has been significant, including the S&P/ASX 200 Index, which has see-sawed from an all-time high of 9202.9 in February to a low of 8365.9 in March. But how can investors truly assess what the effect of these two issues will be over the medium to long term?
I’m reminded of the fable about the Chinese farmer, whose changing fortunes were repeatedly labelled “good luck” and “bad luck” by his neighbours. The farmer preferred to withhold judgment on what was fortunate and what was unlucky in the long run, rather than react immediately to the most recent event.
The impact of AI is a classic example of this. We are currently in a situation where the market is being indiscriminate in its assessment of how the changes brought about by technology will play out.
We’ve seen this most recently with software-as-a-service companies, with millions of dollars wiped off their value across the board in what has been termed “SaaSpocalypse”.
But the reality is, it’s far too early for the market to be making this kind of call. We don’t need to look too far back in history for a similar example of markets overreacting to technological change.
In the late 1990s, as the internet was becoming commercialised for the first time, the market aggressively sold off bank stocks. The logic was
that banks were simply intermediaries between borrowers and savers and could readily be replaced by an online platform.
What this theory didn’t consider was that financial services are a trust business. People may not love their banks, but they trust them. And it is now clear that banks have been among the biggest winners from the growth of the internet, able to reduce their cost base dramatically.
What looked like a threat turned out to be a benefit. So investors should be careful of making judgments now about which companies or sectors will be threatened by AI – it is simply too early to say.
The good news is that this market tendency to “shoot first and ask questions later” can offer useful investment opportunities.
The reaction to GLP-1 drugs is a case in point. When they first became available, the market looked to see which sectors and companies would be the losers and identified medtech companies, such as those that provide sleep apnoea machines.
The thinking was that if patients lost weight because of GLP-1 drugs, the incidence of sleep apnoea would decline, reducing demand for these
devices. As a result, those companies were sold off sharply.
Today, however, GLP-1 drugs and sleep apnoea machines are working together to resolve health issues, and those companies that were sold off have now bounced back.
This created an opportunity for savvy investors to take advantage of a price drop that wasn’t justified.
The war in the Middle East is a different situation, and the human toll is clearly terrible. For Australia, the main consequence so far has been at the petrol pump, and we’ve also seen sharp swings in the sharemarket driven by shifts in rhetoric from the US government, as well as from Iran and Israel.
But, just as with AI’s impact, investors should look to the Chinese farmer as a role model. It’s never a good idea to get too far ahead of the market when investing, and we simply don’t have enough data yet to know what will happen over the medium- to long-term.
One thing we can be sure of is that the war in Iran is accelerating a trend that has been apparent since the COVID-19 pandemic: deglobalisation.
Many governments are choosing to stockpile their own commodities rather than relying on imports. This includes oil, as well as rare earths, lithium, and copper. Not only is this inefficient, but it also affects the supply-and-demand dynamic and inevitably drives up the prices of these commodities.
This is where the outlook for Australia is more positive than many are giving credit for.
In this kind of environment, Australia is well-positioned with a large natural resource base.
Iron ore and coal are our two biggest exports, but the country is also well positioned to see benefits from rising demand for critical minerals such as lithium, rare earths and copper.
Furthermore, the focus on oil has meant another area has been overlooked – liquefied natural gas. Australia has good LNG reserves and is seen as a safe and dependable country to trade with.
A number of Asian countries are therefore likely to turn to Australia as a trade partner that can consistently and reliably deliver LNG. Producers may be able to charge a premium, and there will be pressure on the government to fast-track new projects, which will flow through to the economy.
While the focus so far has largely been on the negatives of the two big stories dominating the news cycle, it’s clear that the market doesn’t yet have all the data and is instead making judgment calls based on incomplete information.
Like the Chinese farmer, it may be best to wait and see what happens, recognising that today’s perceived risks may yet become tomorrow’s opportunities.
