How Wars and Conflicts Affect Your Investments
The fighting between Israel and Iran has worried people around the world and made financial markets jumpy. Israeli attacks on Iranian military sites started on June 13, and Iran fought back. On June 21, the U.S. also attacked Iran’s nuclear sites. The situation is constantly evolving, and no one knows what will happen next. This is happening while other wars continue in different parts of the world.
The human cost of these conflicts is what matters most. However, investors also need to understand how wars impact their investments. Many investors worry that these events could escalate into larger global conflicts, especially now that the U.S. is involved. While this could happen, history shows us a different pattern. Even serious conflicts like Russia’s war in Ukraine and the war in Afghanistan stayed limited. They only caused short-term fluctuations in the stock market.
This doesn’t mean these conflicts aren’t serious. However, it reminds us that making significant changes to our investment portfolios in response to these events can actually hurt us more than help us. During times like these, it’s important to stay calm and learn from history. What should investors focus on to stay disciplined?
Fighting in the Middle East has gotten worse
Just recently, for example, further guidance indicated taxpayers should assume any increase in capital gains tax would be retroactively applied to “late last month” (referring to late April when the Biden administration first outlined the plan)—meaning investors hoping to avoid higher capital gains by selling assets now in advance of legislation passing would have no such luck.
Recent events have shown that the problems in the Middle East are worsening. Israeli forces hit Iranian nuclear sites and military leaders. Iran fought back with missiles and drones that reached Israel. Then, the U.S. bombed three important Iranian nuclear sites. The fighting has also damaged important buildings in both countries, including gas and oil facilities.
The chart illustrates the events that occurred during conflicts over the past 25 years. This includes Middle East fights that changed oil prices, like when Iran attacked Saudi Arabia in 2019. These events demonstrate that while markets can fluctuate in the short term, they typically recover from these shocks within weeks or months. What mattered more during these times were the bigger economic trends.
Oil prices keep changing
Oil prices are one way in which regional wars impact the rest of the world. When the latest conflict started, oil prices jumped above $74 per barrel. Oil prices are still changing a lot, but they came back down toward $70 per barrel when it looked like the fighting might calm down.
Oil prices matter because oil is used to make and transport almost everything we buy. Higher oil prices mean more expensive gas and shipping costs. This makes everyday items cost more for people and businesses. The problem worsens if important shipping routes, such as the Strait of Hormuz in the Persian Gulf, are blocked. About one-quarter of the world’s oil passes through this waterway.
However, it’s essential to note that current oil prices aren’t exceptionally high compared to recent history. While the recent changes are big, prices are still much lower than in 2022, when oil cost more than $120 per barrel during the Russia-Ukraine war. Today’s prices in the mid-$70s are normal for the past few years. This year, oil prices have fluctuated between $60 and $82 per barrel.
How wars affect your investments depends on the economy
For investors concerned about global conflicts, taking a broader perspective can be beneficial. From World War II to the Iraq War, markets initially reacted to these conflicts but were ultimately driven by business fundamentals in the long run.
For example, World War II helped restart American factories after the Great Depression. These changes contributed to the economy’s growth for the remainder of the century. The Gulf War affected oil prices, but it also happened during the computer revolution of the 1990s. In contrast, the decade following the Vietnam War was marked by high oil prices and inflation, which negatively impacted market performance.
The current situation hinges largely on whether the fighting intensifies or begins to subside. The involvement of major countries and threats to important supply routes make things complicated. However, history shows us that even significant regional conflicts typically don’t significantly impact global financial markets for long.
The bottom line? While Middle East tensions have made markets jittery in the short term, investors should remain calm and avoid making significant changes based on news headlines. Maintaining a portfolio that aligns with your long-term financial objectives remains the most effective way to navigate periods of uncertainty.
SOURCE:
Nautical Star Financial Group LLC (“NSFG”) is a Registered Investment Advisor offering advisory services in the states of Texas, Washington, Idaho, and other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute. Follow-up or individualized advice for compensation shall not be made without our first complying with jurisdiction requirements or pursuant to an applicable state exemption. All written content on this site is for informational purposes only. Opinions expressed herein are solely those of NSFG, unless otherwise specifically cited. Material presented is believed to be from reliable sources, and no representations are made by our firm as to other parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant, or legal counsel prior to implementation.
Copyright (c) 2025 Clearnomics, Inc. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.