The US-Israel strikes on Iran in late February 2026 have sent shockwaves through global markets. With the Strait of Hormuz effectively closed to Western-allied shipping and oil prices surging past $110 per barrel, investors are understandably anxious. Here’s what’s driving the volatility and how to respond.
Why Markets Are Falling
The conflict has disrupted one of the world’s most critical energy chokepoints. Roughly 20% of global seaborne oil passes through the Strait of Hormuz daily. When Iran announced its closure in early March, oil prices jumped from around $70 to over $110 per barrel within two weeks.
This matters because expensive energy feeds directly into inflation, squeezes corporate earnings, and raises the prospect of interest rate adjustments. The uncertainty itself compounds the problem – markets hate not knowing how long disruptions will last or whether the conflict will escalate further.
The S&P 500 has fallen approximately 8 to 9% since late February, with banks, airlines, and Asian markets particularly hard hit. Investors have rushed toward traditional safe havens like gold and the US dollar.
What History Tells Us
Geopolitical shocks feel alarming in the moment, but the historical record offers reassurance. According to research examining over 40 geopolitical events since 1941 shows a consistent pattern: markets experience short-term volatility, then recover.
Looking at post-WWII military conflicts, the S&P 500 has typically:
- Fallen an average of 5 to 6% from shock to trough
- Recovered to pre-conflict levels within weeks to months
- Generated positive returns 12 months later roughly 70 to 75% of the time as mentioned by financialadvisoryyork.com
Oil-driven crises can take longer to resolve, but they too eventually pass. Every major geopolitical crisis in modern history – wars, oil shocks, financial crashes – has been followed by market recovery.
What should an Investor do?
Don’t panic sell. Reacting emotionally to headlines typically locks in losses and means missing the recovery. The biggest rebounds often occur immediately after the worst days. Timing the exit is hard, but timing the re-entry is even harder.
Stay diversified. Holding a mix of assets – shares, bonds, commodities, cash – ensures you have some positions working in your favour regardless of what happens next. Diversification across regions and sectors remains one of the most effective tools for navigating uncertainty.
Keep investing regularly. If you contribute monthly, continue doing so. Pound-cost averaging means you buy more shares when prices are low, smoothing out volatility over time.
Rebalance When Necessary: If some parts of your portfolio have become too concentrated or underweighted due to recent market movements, then rebalancing to restore your original allocation is an important and useful exercise to undertake. This can help maintain your risk tolerance and ensure you’re not overexposed to certain sectors or assets.
Keep an Emergency Fund: Having cash set aside for emergencies can help you avoid needing to sell investments at a loss in a downturn. This ensures that you’re not forced to make financial decisions based on short-term market conditions.
Focus on the long term. Over 5, 10, or 20 years, this period will likely appear as a small blip on your portfolio’s trajectory. The fundamentals that drive long-term returns – economic growth, corporate earnings, innovation remain intact.
Consult a Financial Adviser: If you’re unsure about how to navigate the current market, or if you’re feeling uneasy about your portfolio, please feel free to get in touch with us. We will help by providing you with peace of mind and a clear strategy moving forward.
The Bottom Line
More short-term pain is possible, particularly if the conflict escalates or oil prices remain elevated. But for long-term investors, the strategy remains unchanged: stay patient, stay diversified, and avoid making permanent decisions based on temporary events. Those who ride out the volatility will likely be grateful they did.
You can contact one of our independent advisers for personalised advice and support in making confident, informed decisions by using our Facebook or Contact Us pages, or speaking to a colleague in our office on 01329 282882.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount that you invested. Past performance is not a reliable indicator of future performance.
Please note: The content of this blog is for your general information purposes only and does not constitute as investment advice.
