Market Update: What the Iran Conflict Means for Investors

Recent headlines about the escalating conflict involving Iran, Israel, and the United States have understandably created anxiety for investors. News coverage can make it feel as though markets are entering a dangerous new phase.

However, history and current economic conditions suggest a more measured perspective.

Below are a few key points to help put the situation into context.

1. Markets Often React First and Recover Later

Geopolitical events typically create short-term volatility, but they rarely derail markets for long.

Research looking at dozens of military conflicts and geopolitical shocks shows that markets usually experience an initial decline, followed by a recovery once uncertainty begins to fade. Historically, the typical market drawdown during acts of war has been relatively modest and often short-lived.

Similarly, long-term data shows that the stock market has continued to grow through wars, crises, and geopolitical tensions over many decades.

2. The Key Risk Right Now Is Energy

The Middle East plays an important role in global energy supply, and the main economic risk from this conflict relates to oil and gas.

About 20% of the world’s oil trade passes through the Strait of Hormuz, a key shipping route in the region. If shipping or production were significantly disrupted, oil prices could rise sharply.

Higher oil prices can create ripple effects through the global economy by increasing transportation costs, raising inflation, and potentially slowing growth.

However, there are two important points worth remembering:

• Energy spending today represents a smaller share of global GDP than in past energy shocks, giving the economy more ability to absorb higher prices.
• Markets are already watching these risks closely and adjusting expectations accordingly.

Source: US Energy Information Administration, June 17, 2025

3. The Global Economy Entered This Event in Solid Shape

One of the most important factors for markets is the condition of the global economy before the shock occurred.

Encouragingly, economic indicators suggest global growth has been improving. Manufacturing activity is stabilizing and corporate profits remain strong.

This matters because geopolitical shocks are most damaging when they occur during already fragile economic conditions. At present, the broader economic backdrop remains relatively supportive.

4. Diversified Portfolios Are Designed for Periods Like This

While geopolitical events are impossible to predict, diversified portfolios are built specifically to help investors navigate uncertainty.
Several asset classes often behave differently during geopolitical stress:

• Energy and commodities can benefit from higher oil prices.
• Gold and real assets often act as safe-haven investments.
• Bonds can provide stability during periods of market stress.
• Global equities offer exposure to multiple regions and sectors.

Maintaining diversification helps portfolios remain resilient even when one part of the market experiences volatility.

5. Staying Invested Has Historically Been the Best Strategy

Periods of geopolitical tension can create strong emotional pressure to react quickly.
Yet history consistently shows that investors who stay disciplined and maintain their long-term strategy tend to fare better than those who attempt to time the market.

In fact, many geopolitical events have ultimately created opportunities for long-term investors, as market volatility can lead to attractive entry points once uncertainty begins to clear.

Final Thoughts

The situation in the Middle East remains fluid and unpredictable, and markets may continue to experience volatility in the near term.
However, history reminds us that geopolitical events rarely change the long-term trajectory of the global economy or the stock market.

Our focus remains on what we can control:

• Maintaining diversified portfolios
• Owning high-quality businesses
• Managing risk across asset classes
• Staying disciplined through market cycles

As always, if you have questions about your portfolio or the current market environment, please do not hesitate to reach out to us.