Moments like this can feel different. The speed of developments, intensity of media coverage, and global implications can create a sense that markets are entering uncharted territory. While the near-term impact has been uncomfortable, the more important question is whether this event meaningfully changes the long-term outlook for the economy and markets or simply creates another period of temporary disruption.
How We Got Here
On February 28, 2026, the United States and Israel launched large-scale airstrikes on Iran targeting senior leadership and military infrastructure. These strikes killed Iran’s Supreme Leader and other top officials, dramatically escalating tensions. Iran retaliated quickly and broadly by launching missiles and drones at Israel, attacked U.S. military bases across the Middle East, and struck oil and shipping infrastructure. Iran has also responded by effectively blocking the Strait of Hormuz, one of the world’s busiest oil shipping channels. About 20% of the world’s oil and liquefied natural gas (LNG) usually passes through the strait which has sent oil and global fuel prices soaring.
What Matters Most for Investors
Energy Prices and Inflation
Oil is the primary channel through which this conflict affects the global economy. Sustained increases to the price of oil have historically contributed to inflationary pressure in the United States, s changes in energy prices are reflected in broader measures of consumer inflation, according to the U.S. Energy Information Administration. Elevated inflation could impact Federal Reserve policy by potentially delaying rate cuts, or in more extreme scenarios, could bring additional tightening back into consideration. Higher interest rates may increase borrowing costs, weigh on consumer activity, and could slow overall economic growth.
Duration and Scope of the Conflict
The length and scale of the conflict will likely determine its economic impact. A shorter, more contained conflict would likely reduce long-term economic consequences. A prolonged or expanding conflict could carry more weight. Nobody knows exactly how long the conflict will last. Earlier this week the United States announced they were having “productive conversations” with Iran to end the war. However, Iran responded immediately that there had been no direct talks. Talks appear to be ongoing, and the situation continues to rapidly unfold.
Underlying Economic Strength
Corporate earnings, employments trends, and consumer spending remain critical. The underlying economy here in the United States has shown resilience, but sustained higher energy costs and tighter financial conditions could begin to erode that strength if the conflict continues.
Potential Paths Forward
While no one can predict the exact outcome, we’re broadly thinking about a range of possible scenarios based on how similar situations have unfolded historically and how markets have tended to respond:
Near Term Resolution
Diplomatic pressure could build, and negotiations may progress in a way that stabilizes the conflict without significant further escalation. In this type of scenario, energy markets may begin to normalize over time, with oil prices potentially easing, volatility moderating, and investor focus gradually shifting back toward economic and corporate fundamentals.
Prolonged but Contained Conflict
The conflict could continue over an extended period without expanding significantly. This type of environment may lead to persistently elevated oil prices, continued inflationary pressure, and a more cautious stance from central banks. Market volatility could also remain higher than average during this period.
Broader Escalation
The conflict could expand further, potentially involving additional countries or causing more significant disruptions to global energy supply. In this scenario, oil prices could rise more sharply, which may place additional pressure on global growth. Recession risks could increase, and markets may experience greater downside volatility in the near term.
What History Suggests
While every situation is unique, history can give us a helpful framework. Geopolitical events – wars, conflicts, and crisis – have occurred regularly throughout history. While they often cause short-term market declines and increased volatility, their long-term impact on markets varies. Across 43 geopolitical events since 1940, the S&P 500 experienced an average decline of 0.9% in the first month following the event, but went on to deliver an average gain of 3% over the subsequent 12 months:
Source: Carson Investment Research
Even in the face of serious global conflicts, markets have demonstrated an ability to recover and move forward. That’s largely because long-term returns tend to be driven by corporate earnings, economic growth, and innovation. That said, not all events are equal. The degree to which a conflict disrupts those underlying drivers will likely determine its lasting impact.
Source: Carson Investment Research
Staying Grounded as an Investor
The current environment is uncomfortable, but not unfamiliar. Markets are doing what they tend to do in periods of uncertainty: pricing in risk quickly, reacting to new information, and adjusting expectations. One of the dangers for investors is not the volatility itself but the response to it. There can be a temptation to reduce stock exposure, move into cash, and “wait until things settle down”. However, markets respond very quickly to information making the timing of exiting and then re-entering on an ideal timeline extremely difficult. Some of the best days in the stock market closely follow the worst. Missing out on just a few of the best days may be costly.
It’s also important to note that volatility has been a feature of the stock market for decades. Since 1980, the S&P 500 has experienced average intra-year declines of 14.2% and yet still produced positive annual returns in 35 of 46 years:
Source: JP Morgan Guide to the Markets
Final Thoughts
The Iran conflict is serious and continues to evolve. It will likely keep markets volatile in the near term and may influence inflation, energy prices, and central bank policy along the way.
It’s also important to acknowledge that each geopolitical conflict has its own unique characteristics. The scale of this situation, its direct impact on global energy supply, and the potential for broader escalation introduce a wider range of possible outcomes. There are plausible scenarios where the economic impact is more pronounced than what we’ve seen in more typical geopolitical events. In other words, it’s possible that this time plays out differently.
At the same time, markets have a long history of navigating uncertainty. Over time, the fundamental drivers of returns – earnings growth, economic expansion, and innovation have tended to reassert themselves.
Periods like this are not about having perfect foresight. They’re about staying grounded in a thoughtful process while adapting as new information emerges. We will continue to monitor developments closely and adjust where appropriate – through a disciplined investment process and within the context of a long-term financial plan.
If you have questions or want to talk through any of this, we’re here.
Disclosures: This material is published by Howe & Rusling, Inc. (the “Adviser”), a registered investment adviser. Registration with the SEC does not imply a certain level of skill or training. This material is provided for informational and educational purposes only and is not intended as, and should not be construed as, investment, legal, accounting, or tax advice. Views and opinions expressed are as of the date of publication and are subject to change without notice. This communication does not constitute a recommendation, offer, solicitation, or a call to action to buy or sell any security or to implement any investment strategy. Any references to market performance, economic conditions, or geopolitical events are general in nature and may not be applicable to your specific situation. All investing involves risk, including the possible loss of principal. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Past performance is not indicative of future results. Statements regarding future events, market outcomes, or economic conditions are forward-looking and may not develop as anticipated. Markets can be volatile, and geopolitical developments, inflation, and changes in interest rates can materially affect financial markets and investment returns. Information contained herein has been obtained from sources believed to be reliable, including third-party sources, but its accuracy and completeness are not guaranteed. Any links to third-party websites are provided for convenience only; the Adviser does not control, endorse, or assume responsibility for the content, policies, or practices of any third-party sites. Any references to market indexes are for comparative purposes only. Indexes are unmanaged, do not reflect the deduction of advisory fees or transaction costs, and are not available for direct investment. Diversification and asset allocation do not ensure a profit or protect against loss in declining markets. If you would like to discuss how these topics relate to your financial plan, please contact your financial professional. For information about advisory services, including fees and services, please review the Adviser’s Form ADV Part 2A and other disclosure documents.
