As someone who studied U.S. history in college and now works as a financial advisor, I often find that looking at past geopolitical events helps us understand how markets typically respond and, more importantly, how investors should respond. Markets dislike uncertainty, and recently, renewed tensions between the United States and Iran have brought those fears back into focus. Whenever geopolitical tensions rise, especially in the Middle East, financial news headlines tend to amplify the sense that markets could spiral out of control.
Regarding Iran, their geographic position is a major reason. The country sits next to the Strait of Hormuz, a narrow shipping route through which about 20% of the world’s oil supply travels. Any disruption in that region can immediately affect global energy prices. While it may be hard to know how long this conflict will last, history suggests that if there is no sustained disruption to global energy supplies, S&P 500 returns are higher one, three, six, and twelve months after a geopolitical conflict, according to data since 1939.
As tensions rise, oil prices often spike because markets worry about potential supply disruptions. That ripple effect can lead to higher gasoline prices, temporary increases in inflation expectations, and short-term volatility in equity markets.
Beyond the effects on oil, modern tensions between the United States and Iran largely began with the 1979 Iranian Revolution. Prior to that, Iran had been ruled by Shah Mohammad Reza Pahlavi, who maintained close relations with the United States. That relationship ended when the revolution replaced the monarchy with an Islamic Republic led by Ayatollah Ruhollah Khomeini. Later that same year, Iranian students seized the U.S. Embassy in Tehran and held 52 Americans hostage for 444 days. The hostage crisis became a defining moment in U.S.–Iran relations and marked the beginning of decades of political hostility.
Throughout the past few decades, tensions have periodically flared, creating short-term market volatility. Yet despite these geopolitical shocks, the long-term trajectory of markets has remained upward. Historically, geopolitical conflicts tend to cause short-term market volatility, not permanent market damage. Markets may decline initially, but over time they adjust. Economic growth, innovation, and corporate earnings ultimately drive long-term returns, not temporary geopolitical events.
In fact, investors who react emotionally to geopolitical news often risk making the wrong decision at the wrong time. This leads to selling during moments of fear that can lock in losses and prevent investors from participating in the eventual recovery.
This is why we use a time segmentation strategy for retirement portfolios. Rather than relying on the stock market for near-term spending, we build out 10-years of income using bonds and other stable investments. This means that even if the stock market experiences turbulence, the money clients are using for income is largely insulated from that volatility.
Stocks, on the other hand, are used for longer-term growth. The portion of the portfolio invested in equities is typically money that clients will not need for many years. Because of that longer time horizon, short-term market swings become far less important. This structure allows investors to remain patient and disciplined even when headlines create anxiety.
Since the Iranian Revolution in 1979, the world has experienced wars, terrorist attacks, political crises, recessions, and financial crises. And yet, over that same period, the U.S. economy has grown dramatically, and global markets have expanded alongside it. Geopolitical events may dominate the news cycle, but they rarely change the long-term forces that drive markets: innovation, productivity, and economic growth. For investors, the most important thing is to maintain perspective. This means that markets react quickly to fear but recover as uncertainty fades. It doesn’t make it any less comfortable, but it is also a normal and expected part of investing. History shows that patience, diversification, and discipline are far more powerful than reacting to the latest headline.