As widely reported in the news, the U.S. and Israel have carried out military strikes against Iran, with targets including its leadership, military assets, and nuclear infrastructure. 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 operation, named "Operation Epic Fury," is aimed at regime change in Tehran, with strikes anticipated to continue for weeks and a number of U.S. troop casualties already reported.
The situation continues to develop rapidly, and the well-being of civilians in the region and U.S. troops 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." Applied to the current environment, this insight reminds us that while specific geopolitical events cannot be anticipated, their occurrence over time is not surprising. Building a well-structured portfolio and developing sound financial plans is designed precisely to address this kind of uncertainty. Although every situation is unique, financial markets have successfully navigated countless wars, crises, and regional conflicts, including the U.S. operation in Venezuela earlier this year.
The critical principle for long-term investors is to separate geopolitical developments from portfolio decisions. With that in mind, what should investors consider as the situation continues to unfold in the weeks ahead?
The current strikes represent the latest chapter in a long-running story
Although the scale of the current military strikes is notable, tensions between the U.S., Israel, and Iran have been building for quite some time. This latest development follows a U.S. military buildup in the region, failed negotiations over Iran's nuclear program, and President Trump's pledge of support for Iranian protesters who challenged the regime earlier this year.
To appreciate how events have reached this point, it is helpful to review the broader historical timeline
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Tensions between Iran and the West have persisted for decades, including the Iranian regime's longstanding backing of Hezbollah and Hamas, both of which have been central to conflicts across the Middle East.
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In 2019, Iran launched drone strikes against Saudi Arabia's oil infrastructure, temporarily disrupting global oil production and stoking fears of a broader regional conflict.
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Hamas's October 2023 attack on Israel reignited regional hostilities, eventually drawing in Hezbollah and intensifying tensions with Iran.
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Last summer, Israel conducted a 12-day military campaign against Iran, targeting nuclear and ballistic missile programs in what was the most direct confrontation between the two nations in decades.
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Earlier this year, Iranian protesters challenged the regime, prompting President Trump to pledge U.S. support.
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Negotiations over Iran's nuclear program ultimately failed. In the weeks leading up to the current strikes, a significant U.S. military buildup in the region signaled that a broader operation was being planned.
The scope of the latest strikes—including the targeting of Iran's senior leadership—is broader than previous engagements. Nevertheless, history demonstrates that such conflicts are not always a catalyst for lasting market movements.
Oil markets and the Strait of Hormuz
For investors, the most direct channel through which Middle East conflicts influence financial markets is global energy prices. Iran is a member of OPEC and produces approximately 3 million barrels of oil per day and 27 billion cubic feet of natural gas per day. The country also borders the Strait of Hormuz, the world's most strategically important energy waterway. According to the U.S. Energy Information Administration, roughly one-third of all seaborne oil exports and one-fifth of global natural gas passes through this corridor. Even the prospect of disruption to this critical route can have meaningful implications for global energy markets.
Oil prices had already been rising in anticipation of the strikes. The immediate market reaction has seen prices climb further, with WTI reaching the low $70s and Brent crude just under $80 per barrel. While western nations do not directly import oil from Iran, the global and fungible nature of oil markets means that any supply disruption can translate into higher prices worldwide.
Some perspective is worth keeping in mind, however. Current oil prices remain well below the 2022 peak of nearly $128 per barrel reached when Russia invaded Ukraine. The current environment is also notably different. 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. still participates in global energy markets, this level of domestic production helps shield the economy from supply disruptions.
It is also worth noting that oil prices are notoriously difficult to predict. When Russia invaded Ukraine, many anticipated prices would remain elevated for an extended period. Instead, prices stabilized and declined far sooner than many had projected. In a similar vein, the U.S. operation in Venezuela this past January produced a brief reaction in oil prices but had little lasting effect.
Maintaining investment discipline through geopolitical uncertainty
For long-term investors, perhaps the most important takeaway from past geopolitical conflicts is the value of remaining invested. It is entirely natural to feel concerned when headlines are dominated by military strikes, retaliatory attacks, and the prospect of a broader regional conflict. These are events with real human consequences and stand apart from the typical flow of market news surrounding earnings, valuations, and economic indicators.
The accompanying chart illustrates clearly that markets have endured even the most significant global events. 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 over the long term. More recently, the conflicts between Russia and Ukraine, and between Israel and Hamas, introduced uncertainty but did not alter 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 suffered from severe hyperinflation, with its currency, the Rial, having collapsed in value. As a result, very few investors carry direct exposure to Iran within their asset allocations.
Markets may experience elevated volatility in the days and weeks ahead as events continue to develop. Oil prices could move higher, and uncertainty may weigh on investor sentiment. However, attempting to time these market moves has historically proven counterproductive. Markets have demonstrated a capacity to rebound in unexpected ways, and missing even a small number of the best trading days can meaningfully diminish 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 diversified portfolios aligned with their long-term financial goals are best positioned to navigate periods of uncertainty.
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