Citibank: Libya 2011 provided a reference for the S&P 500 in response to the Iran conflict

Investing.com - The ongoing evolving conflict with Iran keeps the market tense. Citigroup analyst Scott Chronert stated in a report this week that investors should look for clues from historical precedents.

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Chronert wrote, “A final resolution remains uncertain,” and the Strait of Hormuz has now become a key risk point.

Citigroup emphasized the possibility that “an effective blockade could lead to oil prices higher than current levels.”

Citigroup has not changed its full-year 2026 outlook for the U.S. stock market but noted that “short-term risks may exist.”

Despite facing a series of pressures, including “AI disrupting narratives” and “significant sell-off in the S&P 500 software sector,” Chronert pointed out that the index has “been basically flat year-to-date,” supported by internal rotation. However, if oil prices remain high, this support could be challenged.

To frame the current situation, Citigroup compared it to the 2011 Libya intervention. Chronert said this “serves as a good reference,” noting that stocks sold off before the airstrikes, while oil prices continued to rise.

He added, “The stock market rebounded when the event occurred,” similar to last summer’s response to the attack on Iran’s nuclear facilities.

However, Citigroup emphasized that other macro shocks ultimately shaped the 2011 market performance. The S&P 500 closed roughly flat that year but was supported by a 12% profit growth.

Citigroup believes the key point is to “be prepared for unexpected consequences of the Iran conflict,” including rising oil prices, inflation effects, and potential economic headwinds.

Nevertheless, Chronert stated that the U.S. market “may become a relatively safe haven in the trend of rising oil prices.”

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