Recent developments surrounding the Iran conflict have raised important questions about how geopolitical events like this can affect financial markets and long-term investors. News reports indicate that the United States and Israel have launched military strikes against Iran, targeting leadership, military assets, and nuclear infrastructure. Iran’s Supreme Leader has reportedly been killed, and Iran has responded with missile and drone attacks across the Middle East.
President Trump has stated that the goal of the operation, called “Operation Epic Fury,” is regime change in Tehran. Strikes are expected to continue for weeks, and a number of U.S. troop casualties have already been reported.
The situation continues to change rapidly, and the safety of civilians and troops in the region is the most important concern. That said, investors naturally have questions about what this means for financial markets, oil prices, and their personal portfolios.
President Dwight D. Eisenhower once said, “Plans are worthless, but planning is everything.” Applied to today, this means that while specific geopolitical events are hard to predict, their regular occurrence is not surprising. Building a well-structured portfolio and making sound financial plans is designed precisely to handle this kind of uncertainty. Each event is unique, but financial markets have weathered countless wars, crises, and regional conflicts — including the U.S. operation in Venezuela earlier this year.
The most important thing for long-term investors is to separate dramatic news headlines from day-to-day portfolio decisions. So, what should investors keep in mind as this situation develops over the coming weeks?
These Strikes Are the Latest Step in a Long-Running Conflict
Although the current strikes are significant in scale, tensions between the U.S., Israel, and Iran have been building for a long time. This latest development follows a monthlong U.S. military buildup in the region, failed negotiations over Iran’s nuclear program, and President Trump’s pledge to support Iranian protesters who challenged the regime earlier this year.
To understand how we arrived at this point, it helps to look at the broader sequence of events:
- Tensions between Iran and the West go back decades, including Iran’s longstanding support for Hezbollah and Hamas — groups that have been involved in conflicts throughout the Middle East.
- In 2019, Iran launched drone strikes against Saudi Arabia’s oil infrastructure, briefly disrupting global oil production and raising fears of a wider war.
- Hamas’s October 2023 attack on Israel reignited conflict in the region, eventually pulling in Hezbollah and increasing tensions with Iran.
- Last summer, Israel conducted a 12-day military campaign against Iran, targeting nuclear and ballistic missile programs in the most direct confrontation between the two countries in decades.
- Earlier this year, Iranian protesters challenged the regime, and President Trump pledged U.S. support.
- Negotiations over Iran’s nuclear program broke down. In recent weeks, a major U.S. military buildup in the region signaled that a larger operation was being planned, leading to the current strikes.
The current strikes are broader than previous ones, including the targeting of Iran’s senior leadership. However, history also shows that such conflicts are not always the main driver of market movements.
How the Iran Conflict Could Affect Markets and Oil Prices
For investors, the most direct way Middle East conflicts affect financial markets is through global energy prices. Iran is a member of OPEC — a group of major oil-producing countries — and produces around 3 million barrels of oil per day, as well as 27 billion cubic feet of natural gas per day. Iran also sits along the Strait of Hormuz, which is the world’s most important energy shipping route. According to the U.S. Energy Information Administration, roughly one-third of all seaborne oil exports and one-fifth of all natural gas passes through this waterway. Even the possibility of disruption to this route could affect global energy markets.
Oil prices had already been rising in anticipation of the strikes. The immediate reaction to the strikes pushed oil prices higher, to the low $70s for WTI (a widely used benchmark for U.S. oil prices) and just under $80 for Brent crude (a benchmark for international oil prices). While western countries do not directly import oil from Iran, because oil is traded globally and one barrel is essentially interchangeable with another, any disruption to supply can push prices up worldwide.
Some perspective is helpful here. Current oil prices remain well below the 2022 peak of nearly $128 per barrel, which occurred when Russia invaded Ukraine. Today’s situation is also quite different. In 2018, the U.S. became the world’s largest producer of oil and natural gas, with domestic production currently exceeding that of other major producers such as Saudi Arabia and Russia. While the U.S. still participates in global energy markets, this level of domestic production helps protect the U.S. economy from supply disruptions elsewhere.
It’s also worth noting that oil prices are notoriously difficult to predict. When Russia invaded Ukraine, many expected high prices to last indefinitely. Instead, prices stabilized and came down much sooner than expected. Similarly, the U.S. operation in Venezuela in January of this year caused a brief move in oil prices but had little lasting effect.
Staying Invested During Periods of Geopolitical Uncertainty
For long-term investors, one of the most important lessons from past geopolitical events is the value of staying invested. It is completely natural to feel uneasy when news reports describe military strikes, retaliatory attacks, and the possibility of a widening regional war. These events have very real human consequences and feel very different from typical market news about company earnings or economic data.
The accompanying chart shows clearly that markets have managed to recover even from the most serious global events. From World War II to the Gulf War to the wars in Iraq and Afghanistan, markets experienced short-term ups and downs but were ultimately guided by the underlying strength of the economy over the long run. More recently, the conflicts between Russia and Ukraine, and between Israel and Hamas, created uncertainty but did not stop the broader market from moving forward.
It is also important to note that Iran plays a very little direct role in most investment portfolios. Iran has been subject to heavy economic sanctions — penalties that restrict trade and financial activity — for many years. Its economy has been struggling with hyperinflation (extremely rapid price increases), and its currency, the Rial, has lost most of its value. As a result, very few investors have any direct exposure to Iran in their investment holdings.
Markets may be volatile in the coming days and weeks as the situation develops. Oil prices could rise further, and uncertainty may cause investor confidence to waver.
However, trying to time these market moves has historically been counterproductive. Markets have often rebounded unexpectedly, and missing even a small number of the best trading days can meaningfully reduce long-term investment returns.
What Investors Should Remember
The Iran conflict represents an important geopolitical development, and it is understandable that investors are paying close attention to how the situation unfolds.
At the same time, history demonstrates that well-diversified portfolios aligned with long-term financial goals are designed to navigate periods of uncertainty like this. While headlines may dominate the news cycle, long-term investment outcomes are typically driven by broader economic growth, innovation, and corporate earnings rather than short-term geopolitical events.
For long-term investors, maintaining perspective and staying focused on a disciplined investment strategy remains one of the most effective ways to navigate uncertain environments.
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