The US-Iran conflict is starting to show real macroeconomic impact. The Strait of Hormuz is fully closed, oil has surged past $100 a barrel, and inflation expectations have increased. When situations like this escalate, markets often react first and ask questions later, but this time it seems the market is pricing in expectations that the conflict will remain manageable. If the strait reopens soon that may end up being appropriate. The market moves so far have been mild but that can change quickly if sentiment about the likely duration of this conflict changes.
Here’s the key point for your plan: you don’t need to make changes to your investments as a result of this conflict. Geopolitical shocks can create short-term volatility, but they rarely change the long-term drivers of portfolio returns. We’ve seen oil shocks before – the 1970s, the Gulf War, 2022 after the invasion of Ukraine – and markets have adapted every time.
What I am watching:
- Timeline: Both sides have incentives to de-escalate, but demands remain far apart. The next week or two will tell us a lot about whether this stays manageable or becomes a bigger problem.
- Energy markets: If oil prices spike further, it could rattle stocks.
- Rates + the dollar: Higher oil prices could keep inflation sticky and delay Fed rate cuts.
What to do right now:
- If you’re diversified and your plan already has a cushion, stay the course. That’s what the plan is for – so you don’t have to play the guessing game during stressful stretches of time.
- If you’re investing on a schedule (401k, monthly brokerage contributions), keep going. Volatility can feel uncomfortable in real time, but it’s also how long-term investors get rewarded.
- If you have a big near-term cash need (house down payment, tuition, tax bill), let’s double-check that your “this money is soon” bucket is still appropriately protected.
Most importantly, remember the drill. We stick to the plan and we don’t time the market. Long-term investors know wealth is built through times of uncertainty.
Keep calm and invest on.
Kaylin Dillon, CFP®
