As widely reported in the news, the U.S. and Israel have launched military strikes against Iran, targeting its leadership, military assets, and nuclear infrastructure. Iran’s Supreme Leader is confirmed to have been killed, and Iran has responded with missile and drone attacks across the Middle East.
The situation continues to evolve rapidly, and the safety of civilians in the region and U.S. troops remain the foremost concern. Without diminishing the gravity of these developments, investors will naturally have questions about what this means for markets, oil prices, and their portfolios.
President Dwight D. Eisenhower once said that “plans are worthless, but planning is everything.” Applied to the current situation, the takeaway is that while specific geopolitical events are inherently unpredictable, the fact that they occur regularly is not. The process of structuring a portfolio and building financial plans is designed precisely to address this uncertainty. While every event is unique, financial markets have successfully navigated countless wars, crises, and regional conflicts, including the U.S. operation in Venezuela earlier this year.
The key for long-term investors is to separate geopolitical headlines from portfolio decisions. With that in mind, what should investors consider as events continue to unfold in the weeks ahead?
The current strikes are the latest development in a long-running story
Although the scale of the current military strikes is significant, tensions among the U.S., Israel, and Iran have been building for some time. This latest development follows a monthlong U.S. military buildup in the region, negotiations over Iran’s nuclear program that ultimately failed to reach an agreement, and President Trump’s pledge to support Iranian protesters who challenged the regime earlier this year.
The scope of the latest strikes, including the targeting of Iran’s senior leadership, is broader than prior engagements. Nevertheless, history also demonstrates that geopolitical conflicts of this nature are not always catalysts for sustained market movements.
Oil prices and the Strait of Hormuz
For investors, the most direct channel through which Middle East conflicts affect financial markets is global energy prices. Iran is a member of OPEC, producing approximately 3 million barrels of oil per day and 27 billion cubic feet of natural gas per day. The country also borders the Strait of Hormuz, the world’s most critical energy waterway. According to the U.S. Energy Information Administration, roughly one-third of all seaborne oil exports and one-fifth of global natural gas passes through this corridor. Even the possibility of disruption to this vital route can have meaningful implications for global energy markets.
Oil prices had already been climbing in anticipation of the strikes. The immediate market reaction saw prices rise further, with WTI crude reaching the low $70s and Brent crude trading just under $80 per barrel. While western nations do not directly import Iranian oil, the global and fungible nature of oil markets means that any supply disruption can drive prices higher.
Some perspective, however, is warranted. Current oil prices remain well below the 2022 peak of nearly $128 per barrel, which was reached when Russia invaded Ukraine. Today’s environment is also meaningfully different. In 2018, the U.S. became the world’s largest producer of oil and natural gas, with current domestic production exceeding that of other major producers such as Saudi Arabia and Russia. While the U.S. remains connected to global energy markets, this level of production provides a degree of insulation against supply disruptions.
It is also worth noting that oil prices are notoriously difficult to predict. When Russia invaded Ukraine, many analysts expected elevated prices to persist indefinitely. Instead, prices stabilized and declined far sooner than most forecasts anticipated. Similarly, the U.S. operation in Venezuela this past January caused a brief move in oil prices but had little lasting effect.
Maintaining investment discipline during geopolitical uncertainty
For long-term investors, the most important lesson drawn from past geopolitical conflicts is the value of remaining invested. It is entirely natural to feel unsettled when headlines describe military strikes, retaliatory attacks, and the potential for a broader regional conflict. These events carry real human consequences and stand apart from the typical flow of market news surrounding earnings, valuations, and economic data.
As the accompanying chart illustrates, markets have proven resilient through even the most serious global events. From World War II to the Gulf War to the wars in Iraq and Afghanistan, markets encountered short-term volatility but were ultimately guided by economic fundamentals over the long run. More recently, the conflicts involving Russia and Ukraine, and between Israel and Hamas, generated considerable uncertainty yet did not derail the broader market trajectory.
It is also important to recognize that Iran plays a minimal direct role in most investment portfolios. Iran has been subject to heavy international sanctions for years, and its economy has been experiencing severe hyperinflation, with its currency, the Rial, having collapsed in value. As a result, very few investors hold any direct exposure to the country in their asset allocations.
Markets may experience heightened volatility in the days and weeks ahead as the situation continues to develop. Oil prices could move higher, and uncertainty may weigh on investor sentiment. However, attempting to time these moves has historically proven counterproductive. Markets have shown a tendency to rebound unexpectedly, and missing even a handful of the best trading days can meaningfully reduce long-term returns.
Perspective for Investors
Geopolitical shocks are unsettling, but they rarely alter the structural drivers of returns: corporate earnings, innovation, productivity, and capital allocation. Reacting to short-term volatility has historically proven more damaging than the events themselves.
Our approach remains unchanged — disciplined diversification, attention to fundamentals, and a long-term mindset. Short-term risk premiums come and go. Long-term capital compounds through them.
For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based upon third party data which may become outdated or otherwise superseded without notice. Third party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have ap- proved, determined the accuracy, or confirmed the adequacy of this article.
