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Markets Since Iran Conflict

April 01, 2026

Time to Read: 2 minutes

Markets are reacting to the Middle East conflict with sharp moves across asset classes, signaling broad risk repricing and shifting safe-haven behavior. While volatility is elevated, fundamentals like earnings growth continue to support our constructive outlook.

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The conflict in the Middle East is evolving rapidly, and the market impact spans key asset classes and indices. Oil prices have appreciated roughly 40-50%, global equities are 5-13% lower and U.S. Treasury yields are about 40 basis points higher, suggesting investors are not seeking safety there. Gold — traditionally a safe haven and inflation hedge — is down 10%. However, the U.S. dollar is 2% stronger. These moves reflect a broad risk repricing and shifting safe-haven dynamics.

Even so, our outlook remains constructive. S&P 500 price-to-earnings ratios have compressed to 19.7 times with earnings growth estimates for 2026 still above 15%. High yield bonds, typically viewed as relatively risky, are down only 1%. International equities, which were outperforming before the war began, have sold off more than the U.S. and are now in a correction.

Despite reduced risk tolerance, current signals point to a temporary disruption in oil prices, near-term pressure on inflation and uneven economic activity rather than the onset of a recession. The longer the conflict persists and oil prices remain elevated, the greater the potential impact; however, historically, markets have priced out oil shocks and geopolitical events over time. We anticipate U.S. growth of roughly 2% this year, and our guidance to clients is to stay the course as volatility often creates buying opportunities for long-term investors.

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Signals from Spreads

Credit spreads have risen yet remain historically low, reinforcing our view that the oil shock is likely temporary — not a driver of long-term growth concerns.

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Dollar Strength: What Does It Mean for Markets?

Geopolitical tensions have lifted oil prices, sent stocks lower and driven flows into the safety of the U.S. dollar, which has strengthened versus peers. While a weaker dollar previously supported international equity outperformance, dollar stabilization now suggests that tailwind is fading, underscoring the importance of diversification across regions and asset classes.

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Returns after Oil Spikes

The Strait of Hormuz, which moves about 20% of global oil, has seen many ships that normally travel through it curtail their activity. Consequently, WTI oil was up over 36% in the five days after the oil supply shock began. Yet equities barely budged, signaling a temporary supply shock, not a larger crisis. Historically, after similar price spikes equities tend to move higher while oil prices decline — further evidence for avoiding emotion-driven investing.

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Impact of Geopolitics over Time?

Tensions between the U.S./Israel and Iran have recently boiled over into a military conflict, which has given many investors the jitters. However, our research shows that equity market pullbacks resulting from geopolitical events are often short lived with the S&P 500 typically higher in the months following these events.

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