As Iran War Tests Investors, Here's How To Navigate The Stock Market During A Crisis

When a crisis such as the Iran war breaks out, investors’ emotions can run wild. Fear of financial losses and the fog of war cloud stock market trading decisions. How can investors handle the latest conflict and its unpredictable moves?

Geopolitical shocks are times for investors to summon the nerves of a warrior and stay with the rhythms of the stock market — not necessarily each day’s results, investing veterans say.

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Rather than try to keep up with headlines from distant battlefields, the playbook for crisis investing is as close as your trading screen. Studying the behavior of the major market indexes and leading stocks provides the best way to navigate storms, as it does in any environment, experts say.

“Investing based on geopolitics is a losing proposition,” said Paul Schatz, president of Heritage Capital in Woodbridge, Conn., in a note to clients. Even with signs foreshadowing the U.S.-Israel attack on Iran, it was difficult to gauge market reaction.

“It’s no different than Nvidia’s earnings, which I thought would blow out,” Schatz said. “Yet, I had no idea how the stock would react.”

Impact Of Wars On Stock Markets

History shows that markets can overreact when a new crisis starts. But they usually calm themselves and return to the prevailing trend that existed before the crisis.

Wars typically don’t cause bear markets. The Yom Kippur war of 1973 and the 9/11 terrorist attacks in 2001 occurred while the S&P 500 was already in a bear market. Neither crisis did anything to turn the market around.

LPL Financial Portfolio Strategist George Smith studied dozens of geopolitical events going back to Pearl Harbor in 1941. He found a common theme: While a global conflict tends to generate uncertainty and anxiety, markets are far more resilient than most investors expect. Dramatic world events can trigger big declines, but nothing catastrophic.

“Typically, markets tend to absorb shocks quickly, stabilize (bottoming on average within 18 days), and recover within a matter of weeks (the average time taken for the S&P 500 to get back to pre-event levels is under 39 days),” Smith said in a report to clients.

“The consistent takeaway is that shocks cause volatility, but rarely change the long-term trajectory of the economy unless accompanied by deeper fundamental stress,” the strategist added.

The lessons from wars, terror attacks, natural disasters, currency crises and other crises? Markets hate uncertainty but adapt quickly. The economic backdrop matters more than the event itself. And shocks rarely alter long-term fundamentals, though they sometimes deepen a recession.

Stock Market And Iran War

The stock market displayed such resilience in recent geopolitical blowups.

On June 13, 2025, when Israel began a bombing campaign against Iran’s nuclear and military sites, the S&P 500 fell 1.1% to 5,976.97 and dipped as low as 5,943.23. By the time the 12-day conflict ended, the index was up nearly 2%.

On June 23, after the U.S. bombed Iran’s nuclear plants, the S&P 500 reversed higher and closed with a 1% increase.

The index chart action around that time provided important signals for the market. The S&P found support at its 21-day exponential moving average on June 23. After that, the index added nearly 15% before it took a 6% tumble in November, when it also spent several days below the 50-day moving average.

In January, the U.S. capture of Venezuelan leader Nicolas Maduro brought muted investor reaction. The S&P 500 rose 0.6% and the Nasdaq added 0.7% on the Monday that followed the weekend operation. The event didn’t alter the stock market’s dull trend.

Operation Absolute Resolve was a short-lived military campaign, although it left questions about Venezuela’s oil industry and U.S. foreign policy.

What Prior Global Conflicts Show

The market often declines ahead of expected wars but starts to rebound once the fighting starts.

In March 2003, for example, the Nasdaq and S&P 500 made follow-through bottoming signals right before the invasion of Iraq, which led to sustained market gains. In January 1991, the S&P pulled back 7% ahead of Operation Desert Storm but rallied 3.7% when the allied bombing of Iraq started on Jan. 16. The index rose as much as 15.7% over the next several weeks.

When Hamas attacked Israel on Oct. 7, 2023, the S&P 500 had been correcting since July 27. The S&P was 6.5% below that July 27 peak. When the U.S. stock market opened on the Monday after the attacks, and while Israel began to strike back, the index rose for three straight days.

But the market correction wasn’t over. The index pulled back nearly 7% the next two weeks until it hit its ultimate low on Oct. 27, 2023. (Investor’s Business Daily’s The Big Picture identified a follow-through rally confirmation on Nov. 1.) From that bottom, the market kept advancing until the tariff announcements in April 2025 sparked a 21% bear market.

Investment Portfolio Management For Iran War

Even though history supports cooler heads, investors should still trade defensively. The Iran conflict has added another layer of risk to a stock market that was already struggling with question marks on artificial intelligence, interest rates, tariffs and the U.S. consumer.

Stocks sold off Friday morning after a stunning February jobs report that saw payrolls fall 92,000 and while the price of crude oil topped $90 a barrel.

IBD’s recommended market exposure is 20% to 40%, down from 60%-80% right before the conflict began.

Portfolio management is essential right now, although the Iran war has merely extended a weakening market backdrop.

“Some of the best stocks topped all the way back in October, have been building tops and have been underperforming,” said David Ryan, three-time winner of the U.S. Investing Championships and a regular guest on IBD Live. “So this is not something that, all of a sudden, everybody wakes up and goes, ‘Oh, what do we do?’”

The Nasdaq 100 index has been underperforming since October. “That should be an area that people should have already moved out of,” Ryan added. Consumer staples, precious metals and other leading industries are getting hit.

“So, it’s almost like we’ve run out of groups to move to, because a lot of them have had good moves,” since the lows in April of last year, he said.

Is the Iran war a buying opportunity? Investors should never stop screening for stock ideas, Ryan said as he recalled Microsoft (MSFT) and Home Depot (HD) setting up for big moves during Desert Storm. Yet there’s reason to be cautious.

These Stock Market Indexes Are Underperforming

The S&P 500 and Nasdaq 100 have been underperforming, and both are starting to live below their 50-day moving averages. Those lines are going sideways or starting to come down.

“I think people just have to be careful and pick their spots,” Ryan said. “If they have too much invested or are too concentrated, especially in areas that have had gigantic moves, like gold (stocks), then I would be careful and maybe take a cut back in the area.”

Ryan says this is not a time to use margin, but rather to raise cash. Study your portfolio and consider taking profits in stocks that have made big moves or hedge those positions. This is the time to look at stocks that remain strong, which could be future leaders, perhaps in the energy sector.

Some stock losses may be too large to ignore. Investors must always protect capital, limiting losses to no more than 7% in any circumstance.

Schatz, the Heritage Capital chief, cautions investors that market volatility will remain elevated, and overnight risks are higher than usual.

Iran War And The Week’s Market Action

Since November, the U.S. stock market has been going basically sideways. This month’s fighting knocked indexes to the lows of their price trends. So far, they are holding support around those lows. That’s a sign the market could shake off war risks but could stay rangebound.

“We’re observing considerable rotation that has left the market somewhat unchanged, and we’re also seeing one of the narrowest breadth ranges that the market has experienced in the last five years,” said Giuseppe Sette, president of investment analytics platform Reflexivity, in a March 2 analysis shared with IBD.

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The Nasdaq is stuck between 22,000 and 24,000 while the S&P 500 is mainly between 6,700 and 7,000. The Nasdaq is trying to bounce off support above the 200-day line.

Iran War And The Oil Market

Whenever there’s a major military conflict in the Middle East, a close correlation emerges between rising oil prices and falling S&P 500 returns, DataTrek Research says.

“This relationship is logical, as nothing more quickly cools U.S. economic activity than a sudden increase in the cost of energy,” the firm said in a report Wednesday. Studying the 1990-91 Gulf War, DataTrek saw that markets make for skilled forecasters.

“Oil prices peaked and U.S. large-cap tech stocks troughed months before military action to liberate Kuwait even started because investors grew more certain that a combination of policy responses would resolve the conflict,” DataTrek added.

Indeed, oil price peaks can signal the lows for stocks, not necessarily military activity.

“While it is very difficult to call either highs or lows in commodities or equities, investors need not be armchair generals to understand moves in equity prices,” the firm said.

Although not an ideal comparison, Iraq’s invasion of Kuwait in 1990 shows U.S. large-cap tech stocks tend to bottom shortly after the S&P 500. Both require energy prices to peak before they can make their lows. Thus, oil price stabilization will be one of the primary signals for assessing current risk and a potential bottom, DataTrek concluded.

Iran War Hits Critical Passage

As for oil, prices tend to be highly sensitive to any conflict affecting production. This is particularly true in the Middle East.

U.S. benchmark West Texas Intermediate futures began ramping up on Friday, Feb. 27, ahead of the Saturday onset of the conflict. By Monday, oil had climbed more than 9% above the Feb. 26 settle price. Futures settled more than 14% above the Feb. 26 level on Wednesday. They then jumped sharply higher Thursday on news that traffic had ground to a halt through the Strait of Hormuz.

The strait is the primary conduit through which oil and liquefied natural gas exports pass from Saudi Arabia, Iraq, the United Arab Emirates and Kuwait, as well as Iran. Some 80% of Saudi exports reportedly exit the Persian Gulf into the Gulf of Oman. They then head for the Red Sea and the Suez Canal, or the Arabian Sea and destinations in Asia.

U.S. forces have prioritized weakening Iran’s navy. U.S. Central Command reported that, by Wednesday, it had sunk more than 20 Iranian naval vessels. It claimed to have reduced Iran’s drone launches by 73% and its ballistic missile launches by 86%. Some of this could be due to Iran trying to preserve munitions.

Iran Oil Export Facilities Affected

Iran’s Kharg island oil export facility — along its coast and almost due west of Kuwait — was reportedly struck early in the U.S.-Israeli assault. Estimates say Kharg handles 90% of Iran’s oil exports, with 80% to 90% of those exports going to China. Bloomberg reported that the facility continued to load oil onto tankers Monday, two days after it was reportedly struck.

Day rates for tankers have soared as Persian Gulf producers continue to pump oil. It then is effectively held hostage in the Persian Gulf. Onshore storage in the Gulf is limited, but shutdowns of production mean lengthy and costly restart processes. So exporters continue to pump, and off-load the output to tankers.

Elsewhere, tankers are being rerouted to supply China and other buyers whose shipments are essentially blockaded in the Persian Gulf. Saudi Arabia is reportedly moving some Persian Gulf exports to the Red Sea via a pipeline. But capacity falls far short of the usual export flow.

On Friday, U.S. oil price futures surged to more than 30% above the Feb. 26 settle level. Europe’s Brent crude benchmark verged on $90 a barrel. Kuwait had begun shutting down its production, and President Donald Trump demanded “unconditional surrender” from Iran before any deal could be made.

Both developments pointed to a longer conflict.

Investor Fears Run High Amid Iran War

No question, the latest Middle East conflict caused investor alarm. The Cboe Market Volatility Index, or VIX, known as the stock market’s fear gauge, surged to its highest level since Nov. 21 on Tuesday.

Such spikes in investor fear act as a contrarian indicator, often signaling market lows. When the VIX rises more than 20% above its 10-day moving average, the stock market tends to find a bottom. Clear examples of that occurred last May and August.

But while this signal works well for market lows, it doesn’t necessarily indicate a sustained rebound. That’s been true this year, when spikes on Jan. 20, Feb. 5, Feb. 17 and this month marked only short-term lows.

How To Read Stock Charts

The Iran war has rattled foreign stocks more than U.S. equities. Funds invested in Spain, France, Germany, other countries and the European Union broke below significant chart levels the past several days. The iShares MSCI Emerging Markets (EEM) exchange traded fund plunged about 8% this past week. That proved to be a greater drop than on the week of April 4, when Liberation Day tariffs were announced.

Indeed, for many foreign indexes, the damage rivaled that of last April, when Trump’s tariffs sent shock waves across global markets. Curiously, the Israel stock market was up 5.6% this past week through Thursday, and the iShares MSCI Saudi Arabia ETF (KSA) reversed slightly higher.

The S&P 500 and Nasdaq, meanwhile, lost about 2% and 1%, respectively, for the week through Friday morning. Yet, both indexes held within their trading ranges.

“History shows that conflict-driven declines eventually create meaningful buying opportunities — but not immediately,” investing champ Mark Minervini, a frequent guest on IBD Live, posted on X Wednesday. “Risk is elevated, and patience is required. This too will resolve. And when it does, a new up-leg will emerge from the geopolitical rubble — as it always has.”

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