How the Iran Conflict Affects Markets and Long-Term Investing

March 2, 2026

Sean Gross, CFP®, AIF® | Co-Founder & CEO 

On February 28, the United States and Israel launched coordinated military strikes against Iran targeting senior leadership, military capabilities, and elements of its nuclear infrastructure. Iranian state media confirmed on March 1 that Supreme Leader Ayatollah Ali Khamenei was killed in the attacks. Iran has since retaliated with waves of missile and drone strikes across the region. President Trump stated the objective of the operation—Operation Epic Fury—is to force regime change in Tehran and indicated that strikes could continue for weeks. As of March 2, at least six U.S. service members have been killed in action and five seriously wounded.

The situation is evolving quickly. The safety of civilians and U.S. troops remains the foremost concern. Without minimizing the gravity of events, investors understandably have questions about potential implications for markets, oil prices, and their portfolios.

The key for long term investors is to separate geopolitical headlines from investment decisions. Diversified portfolios designed around your objectives, risk tolerance, and time horizon are built to navigate uncertainty, including conflict headlines like these. 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.

The latest strikes are part of a longer, ongoing story

Although the current strikes are significant in scale, tensions with Iran have been building for years. The recent timeline of events include:

• In 2019, Iran launched drone strikes against Saudi Arabia's oil infrastructure, temporarily disrupting global oil production and raising concerns about a broader regional war.
• In October 2023, Hamas attacked Israel which led to an expanded conflict and rising tensions with Iran-backed terrorist groups.
• Last summer, Israel (and the U.S through Operation Midnight Hammer) conducted a 12-day military campaign against Iran, targeting nuclear and ballistic missile programs in what was the most direct confrontation between the three countries in decades. 
• Earlier this year, Iranian protesters challenged the regime, with President Trump pledging U.S. support.
• In recent weeks, when negotiations over Iran's nuclear program failed to reach an agreement, a significant U.S. military buildup in the region signaled that a broader operation was being planned, culminating in the current strikes.

The scope of the most recent strikes, particularly the targeting of Iran's senior leadership, is broader than prior engagements. Nevertheless, history demonstrates that such conflicts are not always a direct catalyst 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 and 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. Even the prospect of disruption to this vital waterway could have notable implications for global energy markets.

Oil prices had already been climbing in anticipation of the strikes. The immediate reaction has been a further increase in oil prices, to the low $70s for WTI and just under $80 for Brent crude. Although western countries do not directly import oil from Iran, the global nature of the oil market means that any supply disruption can push prices higher.

Some perspective is warranted, however. Current oil prices remain well below the 2022 peak of nearly $128 per barrel reached when Russia invaded Ukraine. Today's environment differs considerably. In 2018, the U.S. became the world's largest producer of oil and natural gas, with current domestic production surpassing other major producers such as Saudi Arabia and Russia. While the U.S. still participates in global energy markets, this level of production helps shield the domestic economy from supply disruptions.

It is also worth noting that oil prices are notoriously difficult to forecast. When Russia invaded Ukraine, many observers expected prices to remain elevated for an extended period. Instead, prices stabilized and declined far sooner than anticipated. Similarly, the U.S. operation in Venezuela this past January caused a brief movement in oil prices but had little lasting effect.

Maintaining investments through periods of geopolitical uncertainty

For long-term investors, the most important takeaway from past geopolitical conflicts is the value of remaining invested. It is natural to feel unsettled when headlines describe military strikes, retaliatory attacks, and the potential for a wider regional war. These events carry real human consequences and differ from the typical flow of market news around earnings, valuations, and economic data.

The above chart illustrates that markets have successfully navigated even the most serious global events. From World War II to the Gulf War to the wars in Iraq and Afghanistan, markets experienced short-term volatility but were ultimately driven by economic fundamentals over the long run. More recently, the conflicts involving Russia and Ukraine, and between Israel and Hamas, generated uncertainty but did not derail the broader market trajectory.

It is also important to recognize that Iran plays a minimal direct role in investment portfolios. The country has been subject to heavy sanctions for years and its economy has been experiencing hyperinflation, with its currency, the Rial, suffering a severe decline in value. As a result, very few investors have direct exposure to Iran within their asset allocations.

Markets may experience volatility in the days and weeks ahead as the situation continues to evolve. Oil prices could rise further, and uncertainty may weigh on investor sentiment. However, attempting to time these movements has historically proven counterproductive. Markets have demonstrated a remarkable capacity to rebound unexpectedly, and missing even a small number of the best trading days can meaningfully reduce long-term returns.

The bottom line? The U.S. and Israeli strikes on Iran represent an important geopolitical development. However, history shows that investors who maintain flexible, diversified portfolios aligned with their long-term financial goals are best positioned to navigate periods of uncertainty.