Market Insights from Lewis Financial: How Geopolitical Events Like the Iran Conflict Affect Long-Term Investors

Recent news has covered U.S. and Israeli 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 described the goal of "Operation Epic Fury" as regime change in Tehran, with strikes expected to continue for weeks and U.S. troop casualties already reported.

While the safety of civilians and troops is the most important concern, investors are understandably asking what this means for their portfolios. The key takeaway is that while specific events like this are hard to predict, well-structured portfolios are built to handle exactly this kind of uncertainty.

These strikes are part of a long-running conflict

A history of rising tensions between the U.S., Israel, and Iran

The current strikes did not happen overnight. Tensions between Iran and the West have been building for decades, fueled by Iran's support for groups like Hezbollah and Hamas. More recently, a failed U.S.-Iran nuclear negotiation, a significant U.S. military buildup in the region, and President Trump's pledge to support Iranian protesters earlier this year all set the stage for the current operation. While the scope of these strikes — including targeting Iran's senior leadership — is broader than past engagements, history shows that such conflicts are not always a major catalyst for lasting market moves.

What about oil prices?

Energy markets are the most direct link between Middle East tensions and investors

Iran produces around 3 million barrels of oil per day and sits along the Strait of Hormuz — a critical shipping route through which roughly one-third of all seaborne oil and one-fifth of global natural gas passes. Any disruption there can push energy prices higher. Oil prices have already risen in response to the strikes, with WTI crude moving to the low $70s and Brent crude just under $80 per barrel.

That said, today’s oil prices remain well below the nearly $128 per barrel peak seen in 2022 when Russia invaded Ukraine. The U.S. is now the world’s largest oil and natural gas producer, which helps cushion the domestic economy from global supply shocks. Oil prices are also notoriously difficult to predict — when Russia invaded Ukraine, many expected prices to stay high for a long time, but they stabilized and fell faster than most expected.

Staying invested during uncertain times

For long-term investors, the most important lesson from past geopolitical events is to stay invested. History shows that markets have weathered major global crises — from World War II to the Gulf War to more recent conflicts involving Russia-Ukraine and Israel-Hamas — and have generally recovered over time. Short-term volatility is normal, but economic fundamentals tend to drive markets over the long run.

It is also worth noting that Iran plays almost no direct role in most investment portfolios. Years of heavy sanctions and economic problems, including hyperinflation and a collapsing currency (the Rial), mean that very few investors have any direct exposure to Iran. Trying to time market moves during events like this has historically done more harm than good — missing even a few of the market’s best 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.