As war with Iran threatens to disrupt economy, CalPERS considers risks to fund
With the war between Iran and the U.S. and Israel entering its third week, leaders of California’s largest retirement system consulted a geopolitical expert about the conflict’s potential threats to the global economy and the fund’s $600 billion assets.
Since the Trump administration and Israel killed Iran’s supreme leader last month, oil prices have surged and financial markets have dropped. The near shutdown of the Strait of Hormuz, a critical shipping route off the coast of Iran, has the potential to upend the flow of oil supplies, which could have wide-ranging economic impacts.
During a Monday investment committee meeting, Lieutenant General David Bellon, a retired commander of US Marine Corps Forces Reserve, and member of the Academy Securities’ Geopolitical Intelligence Group, provided an update on the conflict and its potential impact on the California Public Employees’ Retirement System’s investment portfolio.
Bellon said the conflict has already resulted in a significant reduction in Iran’s ballistic missile stockpile and he predicted that the U.S. campaign was 50% complete. The lieutenant general noted that ending the campaign before sufficiently incapacitating Iran’s powerful paramilitary force, the Islamic Revolutionary Guard Corps, would be a “massive strategic misstep.”
If the Strait of Hormuz remains closed for several more weeks, the global economy should expect to see more significant impacts, Bellon told the CalPERS board.
Bellon explained that commercial leaders decided to stop shipping oil through the shipping route because they did not want to accept the risk after multiple vessels carrying oil were attacked in recent weeks, Bellon said. Iran’s targeting of oil tankers in the Strait of Hormuz is meant to threaten global commerce and get the world’s attention.
“We’re talking about it in Sacramento. I would call that a relative win for the IRGC,” Bellon said.
The lieutenant general said the closure of the Strait of Hormuz was a “critical vulnerability” of the U.S. and Israel’s campaign given its importance as a shipping route. Roughly one fifth of the world’s oil passes through the Strait of Hormuz, the BBC reported.
President Donald Trump has been criticized by Democratic leaders for not having a clear goal for the conflict in Iran. His timeline and objective for the war have shifted in the weeks since the U.S. and Israel attacked key military targets in the region.
When asked about what warning signs for which the board should be on the lookout , Bellon pointed to two indicators that would show that risk to the global economy was decreasing.
The first sign is a “freedom of navigation” exercise in which a U.S. military vessel will safely pass through the Strait of Hormuz. The second indicator would be the U.S. Navy escorting several commercial ships through the passage safely. Bellon said those two steps will help communicate that the situation is getting better.
“If that trend doesn’t start happening at the end of the next two weeks, I would say the markets will probably decide that this is going to be protracted, and you might see something more negative,” he said.
CalPERS Chief Investment Officer Stephen Gilmore said the future pricing of oil, which has modestly increased since the start of the war, suggests that markets are assuming this conflict will be relatively short. If the future pricing of oil increases more, there would likely be broader economic impacts such as higher inflation, Gilmore said.
“The key thing is, how protracted is this?” Gilmore said. “If it extends, you create greater and greater economic risks.”
After listening to the lieutenant general’s analysis, CalPERS board member Lisa Middleton said that it seems the best course of action for the board was to stay the course, “but I think all of us are a bit nervous.”
“As an organization that’s responsible for the long term economic health of two and a half million CalPERS members, having a world economy that is functioning on all cylinders only makes our job easier,” Middleton said in an interview. “The opposite makes our job much, much harder.”
Middleton emphasized that the board does not make investment decisions, but has oversight responsibilities over the investment professionals. She said Bellon’s presentation to the board was reassuring because it indicated that the investment team is considering the different scenarios about how CalPERS should respond to changing markets.
“That’s the kind of expertise that we need them to be able to consult with as they’re making their decisions,” Middleton said.
This story was originally published March 16, 2026 at 3:46 PM.
