Conflict in Iran "Operation Epic Fury"

The U.S. and Israel have launched military strikes against Iran, targeting its leadership, military assets, and nuclear infrastructure. Iran's Supreme Leader is confirmed to have been killed, and Iran has retaliated with missile and drone attacks across the Middle East. President Trump has stated that the goal of the operation, called "Operation Epic Fury," is regime change in Tehran, with strikes expected to continue for weeks and a number of U.S. troop casualties already reported. The situation is changing quickly, and the safety of civilians and troops in the region is the most important concern. That said, investors naturally have questions about what this means for markets, oil prices, and their portfolios. History shows that while specific events like this are hard to predict, they do happen regularly, and well-structured financial plans are designed to handle exactly this kind of uncertainty.

This conflict is part of a longer story

Tensions between the U.S., Israel, and Iran have been building for years. This latest escalation follows a monthlong U.S. military buildup in the region and failed negotiations over Iran's nuclear program. Key events leading up to today include Iran's 2019 drone strikes on Saudi oil infrastructure, the Hamas attack on Israel in October 2023, and last summer's 12-day Israeli military campaign against Iran. Earlier this year, Iranian protesters challenged the regime, and President Trump pledged U.S. support.

While the current strikes, including the targeting of Iran's senior leadership, are broader than previous engagements, history shows that these kinds of conflicts are not always a major driver of long-term market performance.

What this means for oil prices

Oil prices are sensitive to Middle East tensions, but have remained well below prior peaks

The most direct way Middle East conflicts affect financial markets is through energy prices. Iran produces around 3 million barrels of oil per day and sits along the Strait of Hormuz — the world's most important energy shipping route. According to the U.S. Energy Information Administration, about one-third of all seaborne oil exports pass through this waterway. Any disruption there can push energy prices higher.

Oil prices had already been rising ahead of the strikes and have moved further into the low $70s for WTI and just under $80 for Brent crude. However, these levels are still well below the 2022 peak of nearly $128 per barrel, which followed Russia's invasion of Ukraine. It is also worth noting that the U.S. became the world's largest oil and natural gas producer in 2018, which helps shield the domestic economy from some supply disruptions. Oil prices are also notoriously difficult to predict, when Russia invaded Ukraine, many expected prices to stay high for a long time, but they stabilized and fell sooner than expected.

Why staying invested matters

Markets have historically recovered from major geopolitical events

For long-term investors, the most important lesson from past conflicts is the value of staying invested. Markets have weathered major global events, from World War II to the Gulf War to more recent conflicts in Ukraine and the Middle East, and have been driven by economic fundamentals over time, not short-term headlines. It is also worth noting that Iran plays a very small direct role in most investment portfolios, as heavy sanctions have kept its economy largely isolated from global markets.

There may be some market volatility in the weeks ahead as the situation develops. But trying to time these moves has historically been counterproductive. Missing even a few of the market's best trading days can meaningfully reduce long-term returns.

As always, feel free to reach out with any questions. Thank you for the opportunity to work as your Trusted Advisor.