As tensions with Iran have continued into a second month, we’ve seen increased volatility and a pullback across the markets year-to-date. Naturally, that can feel unsettling—but context matters here. This has been driven less by underlying economic data and more by uncertainty and investor emotion—particularly around oil prices, inflation concerns, and geopolitical risk.
In other words:
The headlines are changing faster than the fundamentals.
Last week is a good example of how quickly sentiment can shift:
- At the beginning of the week, markets moved higher on optimism that tensions could ease
- Then Wednesday evening, after the President’s speech, markets pulled back Thursday morning. Despite no major change in the underlying situation. By afternoon on Thursday the markets were recovered from the reaction earlier in the day.
So what we’re seeing is a market reacting in real time to news—not necessarily to long-term economic changes.
If we look at history, markets have gone through similar periods during past geopolitical events. In 1990, at the start of the first Gulf War, the U.S. economy was slipping into recession. Corporate profits were flattening, inflation remained elevated, and consumer confidence was fragile. With little fundamental support in place, markets initially struggled. Yet even then, equities began recovering well before the conflict formally ended, anticipating eventual stabilization.
By contrast, in 2003, when the Iraq War began, the economy had already healed from the dotcom bust and the 2001–2002 corporate accounting scandals. Corporate earnings were rebounding, monetary policy was supportive, and valuations were reasonable. With stronger fundamentals in place, markets responded positively after hostilities started and began a five-year bull market that didn’t peak until October 2007.
Today, I am not seeing clear signs that the long-term economic or earnings outlook has been significantly impacted. First and foremost, a demilitarized Iranian regime would ultimately contribute to a safer world and more stable markets, mitigating a key geopolitical risk that has persisted for nearly five decades. From a market perspective, nothing about the current conflict undermines my confidence in the long‑term attractiveness of equities. For stocks, the more positive 2003 path seems more likely than 1990.
Beyond the human element, we can all acknowledge that this environment is uncomfortable. The damage the Iranian regime has inflicted on energy and other infrastructure in the region is unsettling. Iran maintains control of the Strait of Hormuz. There is no easy off ramp. Yet history shows that markets often recover well before geopolitical tensions fully resolved and frequently with surprising force once clarity begins to emerge. As stocks hinted at with big gains on the last day of March, that outcome remains possible in my view.
Markets often begin to recover before situations fully resolve, and sometimes when it feels the most uncertain.
For now, myfocus remains the same:
- Stay disciplined
- Stay diversified
- Stay aligned with your long-term plan
If you have any questions or want to talk through your portfolio, I am available.
Please Note: Past performance is no guarantee of future results. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.