Things will get better.

At first, investors didn’t seem to be very concerned about the sudden outbreak of a major war in the Middle East. The TSX actually rose on Monday, March 2, the first day of trading after the bombings started. New York’s major indexes were down, but the losses weren’t significant.

It was only on Tuesday that the significance of the hostilities seemed to hit traders. The choking of the Strait of Hormuz. Attacks on Saudi Arabia, Kuwait, Qatar, Bahrain, and the UAE. Lebanon dragged into the fray by weakened but still dangerous Hezbollah.

It continued to escalate from there. A British base in Cyprus came under drone attack. Even tiny Azerbaijan became involved when Iranian drones crossed its border. Russia has been reported to be supplying Iran with military intelligence.

Predictably, oil prices have shot up, threatening to reignite inflation. Hopes for interest rate relief in the US look dim as a result. International trade, already under pressure due to the Trump tariffs, has been dealt another blow.

With no end to the conflict in sight, world markets sagged. Even gold, normally a safe haven in times of trouble, took a hit.

The stock market damage hasn’t been too serious yet. The TSX is still up by 4.32% year-to-date, despite last week’s sell-off. US indexes are down marginally for the year but we’re a long way from correction territory (a decline of 10%+ from the previous high).

It’s what come next that matters. We’re a week into this conflict, and there appears to be only two likely outcomes. The most desirable is a quick and decisive end to hostilities, leaving a bruised but still viable Iran ruled by a credible government. In that scenario, markets would snap back quickly, oil and gas prices would revert to their pre-March levels, and the world would return to focusing on Trump’s next tariff moves.

The worst-case scenario would see the war drag on for months as a desperate Iran, ruled by a hard-line council, continues to lash out at any perceived enemy and manages to enforce the closure of the Strait of Hormuz. In this situation, oil and gas prices would continue to rise. Qatar’s energy minister has suggested oil could reach US$150 a barrel. Inflation fears would skyrocket. A frustrated Donald Trump might be tempted to put boots on the ground in support of minority groups like the Kurds in an effort to install a more compliant regime.

The result could be an escalating market collapse as the economic impact of the conflict becomes increasingly widespread.

So, what should you do in these circumstances?

Here are my top six tips:

Taking some of that money off the table and holding it in reserve in case the situation further deteriorates isn’t a bad idea. But check out the tax consequences before acting. And don’t overdo it. If there’s a quick ending to the war, shares of quality companies will bounce back, perhaps surprisingly quickly.

There may be a spill-over impact on commodities which are not directly affected by the war but get hit by high shipping costs for fuel and insurance.

The counter to that is inflation, which almost certainly would push up interest rates. That increases the opportunity cost of owning gold. If you have big profits in gold, you might consider taking some, but my expectation is that the safe-haven approach will prevail.