Iran Conflict and What It Means for Investors

Recent news has reported that 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 retaliated with missile and drone attacks across the Middle East. President Trump has stated that the goal of the operation, dubbed "Operation Epic Fury," is regime change in Tehran, with strikes expected to continue for weeks and a number of U.S. troop casualties already reported.

The situation is evolving rapidly, and the safety of civilians in the region and our troops are the most important consideration. That said, investors will naturally have questions about what this means for markets, oil prices, and their portfolios. While each geopolitical event is unique, financial markets have navigated countless wars, crises, and regional conflicts throughout history, including the U.S. operation in Venezuela earlier this year. The key for investors is to separate geopolitical headlines from portfolio decisions.

A new chapter in a long-running conflict

While the scale of the current strikes is significant, tensions between the U.S., Israel, and Iran have been building for years. This latest development follows a monthlong U.S. military buildup in the region, failed nuclear negotiations, 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 previous engagements. However, history makes it clear that geopolitical conflicts are not always a lasting catalyst for market movements.

Oil markets and the Strait of Hormuz are in focus

For investors, the most direct channel through which Middle East conflicts affect financial markets is global energy prices. Iran produces around 3 million barrels per day of oil and 27 billion cubic feet per day of natural gas. The country also borders the Strait of Hormuz—the world’s most critical energy waterway. According to the U.S. Energy Information Administration, approximately one-third of all seaborne oil exports and one-fifth of natural gas passes through this region. Oil prices had already been rising in anticipation of the strikes, and the immediate reaction has been a further jump to the low $70s for WTI and just under $80 for Brent crude.

Some perspective is warranted, however. Current oil prices remain well below the 2022 peak of nearly $128 per barrel reached when Russia invaded Ukraine. The U.S. became the world’s largest producer of oil and natural gas in 2018, with domestic production currently exceeding that of Saudi Arabia and Russia, which helps insulate the domestic economy from supply disruptions. As history has shown, oil price spikes—such as those following Russia’s invasion of Ukraine and the U.S. operation in Venezuela earlier this year—have often proved shorter-lived than initially expected.

The case for staying invested during uncertainty

For investors, the most important lesson from past geopolitical conflicts is the value of staying invested. The accompanying chart illustrates that markets have navigated even the most serious global events—from World War II to the Gulf War to the conflicts in Iraq and Afghanistan—experiencing short-term volatility while remaining driven by economic fundamentals over the long run. It is also worth noting that Iran plays a minimal direct role in investment portfolios, given that the country has been under heavy sanctions for years and its economy has experienced hyperinflation, with its currency collapsing.

Markets may experience volatility in the coming days and weeks as the situation unfolds, and uncertainty could weigh on investor sentiment. However, attempting to time these moves has historically been counterproductive—missing even a few of the best trading days can significantly reduce long-term returns. President Dwight D. Eisenhower once said that "plans are worthless, but planning is everything.” The process of structuring a portfolio and making financial plans is designed precisely to deal with this kind of uncertainty.