As widely reported, the U.S. and Israel have carried out military strikes against Iran, with targets including its leadership, military capabilities, and nuclear facilities. Iran’s Supreme Leader has been confirmed killed, and Iran has responded with missile and drone attacks throughout the Middle East. President Trump has indicated that the objective of the operation, known as “Operation Epic Fury,” is regime change in Tehran, with strikes anticipated to continue for several weeks and U.S. troop casualties already reported.
The situation continues to develop at a rapid pace, and the well-being of civilians in the region and U.S. military personnel remains the foremost concern. Without diminishing the gravity of these events, investors will understandably have questions about the implications for markets, oil prices, and their portfolios.
President Dwight D. Eisenhower once said that “plans are worthless, but planning is everything.” In the context of today’s events, this suggests that while specific geopolitical developments cannot be anticipated, their periodic occurrence is well understood. Building a portfolio and establishing a financial plan is designed precisely to address this kind of uncertainty. Although every situation is distinct, financial markets have successfully navigated countless wars, crises, and regional conflicts, including the U.S. operation in Venezuela earlier this year.
The essential challenge for long-term investors is to keep geopolitical headlines separate from portfolio decisions. What key considerations should investors keep in mind as events continue to unfold over the coming weeks?
The current strikes are the latest development in a long-running story
Although the current strikes are significant in scale, tensions among the U.S., Israel, and Iran have been building for an extended period. This latest escalation follows a month-long U.S. military buildup in the region, failed negotiations over Iran’s nuclear program, and President Trump’s earlier pledge to support Iranian protesters who challenged the regime.
To fully appreciate how the situation reached this point, it is useful to review the broader sequence of events:
• U.S. and Western tensions with Iran span several decades, rooted in part in the Iranian regime’s long-standing support for Hezbollah and Hamas, organizations that have been central to conflicts throughout the Middle East.
• In 2019, Iran launched drone strikes targeting Saudi Arabia’s oil infrastructure, temporarily disrupting global oil supply and raising concerns about a broader regional conflict.
• Hamas’s October 2023 attack on Israel reignited hostilities in the region, eventually drawing in Hezbollah and intensifying tensions with Iran.
• Last summer, Israel undertook a 12-day military campaign against Iran, with strikes targeting nuclear and ballistic missile programs in what represented the most direct confrontation between the two nations in decades.
• Earlier this year, Iranian protesters challenged the regime, and President Trump pledged U.S. support for their cause.
• Following the breakdown of nuclear negotiations, a major U.S. military buildup in the region in recent weeks signaled that a larger operation was in preparation, ultimately leading to the current campaign.
The breadth of the latest strikes—most notably the targeting of Iran’s senior leadership—goes further than previous engagements. Nevertheless, history demonstrates that such conflicts are not always a decisive catalyst for sustained market movements.
Oil markets and the Strait of Hormuz
The most direct channel through which Middle East conflicts influence financial markets is through global energy prices. Iran is an OPEC member that produces approximately 3 million barrels of oil per day and around 27 billion cubic feet of natural gas per day. The country also borders the Strait of Hormuz, the world’s most strategically vital energy corridor. According to the U.S. Energy Information Administration, roughly one-third of all seaborne oil exports and one-fifth of global natural gas transit this waterway. Even the prospect of disruption to this critical passage carries meaningful implications for global energy markets.
Oil prices had already been trending higher in anticipation of the strikes. In the immediate aftermath, prices moved up further, with WTI 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 translate into higher prices worldwide.
Some perspective is warranted, however. Current oil prices remain considerably below the 2022 peak of nearly $128 per barrel, which followed Russia’s invasion of Ukraine. The current environment differs in important ways. Since 2018, the U.S. has been the world’s largest producer of oil and natural gas, with domestic output surpassing 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 meaningful buffer against supply shocks.
It is also worth noting that oil prices are notoriously difficult to forecast. After Russia’s invasion of Ukraine, many analysts expected elevated prices to persist indefinitely—yet prices stabilized and fell much sooner than anticipated. Likewise, the U.S. operation in Venezuela in January of this year caused a brief uptick in oil prices, but produced little lasting effect.
Maintaining investment discipline during geopolitical uncertainty
For long-term investors, perhaps the most enduring lesson from past geopolitical conflicts is the importance of remaining invested. It is entirely natural to feel unsettled when news coverage focuses on military strikes, retaliatory attacks, and the potential for a broader regional conflict. These events carry genuine human consequences and stand apart from the routine flow of market-related news covering earnings, valuations, and economic data.
The accompanying chart illustrates that markets have successfully navigated even the most serious global disruptions. From World War II to the Gulf War to the conflicts in Iraq and Afghanistan, markets experienced short-term volatility but were ultimately guided by underlying economic fundamentals. More recently, the conflicts involving Russia and Ukraine, and Israel and Hamas, introduced periods of uncertainty without fundamentally altering the long-term market trajectory.
It is also worth noting that Iran plays a very limited direct role in investment portfolios. The country has been subject to extensive sanctions for many years, and its economy has experienced severe hyperinflation, with the Rial currency losing much of its value. As a result, very few investors carry meaningful direct exposure to Iran within their asset allocations.
Markets may face increased volatility in the days and weeks ahead as the situation continues to evolve. Oil prices could move higher, and uncertainty may weigh on investor sentiment. However, attempting to time these shifts has historically proven counterproductive. Markets have often rebounded in ways that were difficult to anticipate, and missing only a handful of the strongest trading days can meaningfully reduce long-term investment returns.
The bottom line? The U.S. and Israeli strikes on Iran represent an important geopolitical development. However, history shows that investors who maintain diversified portfolios aligned with their long-term financial goals are best positioned to navigate periods of uncertainty.
Advisory services provided by NewEdge Advisors, LLC as a registered investment adviser.