As the Iran conflict enters its second month, investors are understandably on edge. Geopolitical uncertainty has a way of making the future feel especially murky. But stepping back and looking at how stock markets have responded to past conflicts reveals something encouraging: equities are far more resilient than the moment often suggests.
Two Conflicts Worth Revisiting
To make sense of today’s environment, it helps to look at two historical parallels — the Gulf War of 1990 and the Iraq War of 2003. They unfolded under very different economic conditions, and the contrast between them is instructive.
1990 – A Weak Foundation When the first Gulf War began, the U.S. economy was already slipping into recession. Corporate profits were flattening, inflation remained elevated, and consumer confidence was fragile. Without strong fundamentals to lean on, markets initially struggled. Yet even then, equities began recovering well before the conflict formally ended — anticipating eventual stabilization before it arrived.
2003 – A Stronger Starting Point By the time the Iraq War began, the economy had largely healed from the dot-com bust and the wave of corporate accounting scandals that followed. Earnings were rebounding, monetary policy was supportive, and valuations were reasonable. Markets responded positively once hostilities began, kicking off a five-year bull market that didn’t peak until October 2007.
Where Do We Stand Today?
Today’s environment carries echoes of both periods. But critically, there is little evidence that the long-term economic or earnings outlook has been meaningfully impaired.
Consider the bigger picture: a demilitarized Iranian regime would ultimately contribute to a safer world and more stable markets — eliminating a geopolitical risk that has persisted for nearly five decades. From a purely market standpoint, nothing about the current conflict undermines the long-term case for equities. If forced to choose a historical parallel, the more constructive 2003 path seems more likely than 1990.
Acknowledging the Discomfort
That said, none of this makes the current environment easy to sit with. The damage Iran has inflicted on regional energy and infrastructure is real and unsettling. Iran’s control of the Strait of Hormuz remains a significant pressure point, and there is no obvious off-ramp in sight.
Still, history shows that markets frequently recover well before geopolitical tensions are fully resolved — and often with surprising speed once clarity begins to emerge. The strong gains on the final day of March offered a glimpse of what that kind of pivot can look like.
What This Means for Investors
No one can say precisely how long this volatility will last. But the underlying economic foundation and the earnings power of corporate America remain intact. Once U.S. military objectives are achieved and tankers can move freely through the Strait of Hormuz, attractive opportunities are likely to emerge from this downturn.
For long-term investors, the playbook remains familiar:
- Keep portfolio risk at or near long-term targets
- Stay well diversified
- Look for opportunities to put weakness to work
Volatility is uncomfortable. But for patient investors, it has historically been a feature of markets, not a reason to abandon them.
* Andrew Beatty, of LPL Financial, consults with GenWealth as their Chief Investment Officer.
This material is for general information and educational purposes only and is not intended to provide specific advice or recommendations for any individual. Investing involves risk including the loss of principal. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. GenWealth Financial Advisors and LPL Financial do not provide legal advice or tax services. Please consult your legal advisor or tax advisor regarding your specific situation.
