How the Iran Conflict Affects Long-Term Investors

The U.S. and Israel have launched military strikes against Iran, targeting its leadership, military assets, and nuclear infrastructure. Iran's Supreme Leader has been confirmed 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, with strikes expected to continue for weeks.

While the safety of civilians and troops is the most important concern, investors naturally want to know what this means for their portfolios. The key point is that while specific events like this are hard to predict, the fact that geopolitical crises happen regularly is not surprising. A well-structured portfolio is designed to handle exactly this kind of uncertainty.

This is part of a longer-running conflict

Tensions between the U.S., Israel, and Iran have been building for a long time. This latest escalation follows a monthlong U.S. military buildup in the region, failed nuclear negotiations, and President Trump's earlier pledge to support Iranian protesters. Key events include Iran's 2019 drone strikes on Saudi oil infrastructure, Hamas's October 2023 attack on Israel, and Israel's 12-day military campaign against Iran last summer. The current strikes, which include targeting Iran's senior leadership, are broader in scope than past engagements.

What this means for oil prices

The most direct way Middle East conflicts affect markets is through energy prices. Iran produces around 3 million barrels of oil per day and sits along the Strait of Hormuz — the world's most important shipping lane for energy. About one-third of all seaborne oil exports pass through this route. Even the threat of disruption can push prices higher.

Oil prices have already risen in response to the strikes, reaching the low $70s for WTI and just under $80 for Brent crude. However, these levels are still well below the 2022 peak of nearly $128 per barrel seen when Russia invaded Ukraine. Importantly, the U.S. became the world's largest oil and natural gas producer in 2018, which helps protect the domestic economy from global supply disruptions. Oil prices are also notoriously difficult to forecast — when Russia invaded Ukraine, many expected prices to stay high for a long time, but they fell much sooner than expected.

Why staying invested matters

History shows that markets have weathered major geopolitical events — from World War II to the Gulf War to more recent conflicts in Ukraine and the Middle East — and continued to grow over the long run. Short-term volatility is normal during uncertain times, but markets are ultimately driven by economic fundamentals, not headlines.

It is also worth noting that Iran has been under heavy international sanctions for years and plays virtually no direct role in most investors' portfolios. Trying to time the market around events like this has historically been counterproductive — missing just a few of the market's best trading days can significantly 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 diversified portfolios aligned with their long-term financial goals are best positioned to navigate periods of uncertainty.