Iran tensions are pushing oil prices and market volatility higher as risks to Strait of Hormuz shipping raise supply concerns.
The Russia-Ukraine war remains a market risk tied to trade disruptions, energy flows, and economic sanctions.
Investors should focus on whether supply disruptions persist, since headline-driven market swings often fade if economic activity holds up.
The Iran conflict and Russia-Ukraine war are contributing to global market volatility by influencing oil prices, energy shipping routes, and inflation expectations. One of the biggest near-term risks is disruption in the Strait of Hormuz, a critical corridor for global oil and liquefied natural gas shipments. For investors, the key question is whether these conflicts lead to lasting supply disruptions or remain shorter-term market shocks.
Iran moved to the center of investor attention after U.S. and Israeli military operations expanded in late February and continued into late March. The S&P 500 fell about 7% below its prior peak before stabilizing, while developed and emerging international stock indexes declined roughly 8% to 12%. 1 International markets came under greater pressure because many economies in Europe and Asia rely more heavily on imported energy.
Energy markets remain the Iran conflict’s most direct transmission channel because the Strait of Hormuz is a critical energy transportation corridor with limited near-term alternatives. The U.S. Energy Information Administration estimates oil flows through the strait averaged about 20 million barrels per day in 2024, accounting for roughly 20% of global petroleum liquids consumption. They also report about 20% of global liquefied natural gas trade transited the same route in 2024, a key resource for Europe. 2 The International Energy Agency similarly highlights Hormuz as a pivotal chokepoint for seaborne oil trade, which is why even the threat of disrupted transit can move prices quickly.
Disruptions can also influence food-price risk when it tightens fertilizer supply and raises farm input costs. The Fertilizer Institute indicates that nearly 50% of the global exports of urea, the most common nitrogen fertilizer worldwide, originate from countries west of the strait and typically transit this route, which can tighten availability when shipping slows. 3 For import-dependent regions, higher energy and fertilizer costs work through the economy over time through transportation costs and food prices.
Three simplified outcomes help frame the range of possibilities. In a best-case outcome, shipping conditions improve quickly, commercial traffic resumes more reliably, and energy prices ease as supply concerns fade. Alternatively, disruption may persist for a few weeks or several months, keeping energy and transport costs elevated and raising the risk of broader market volatility stemming from inflation concerns, especially in energy-importing regions.
In a tail-risk outcome, disruption extends into the summer, increasing the chance that sustained higher energy costs begin to weigh on consumer spending and business activity. In that scenario, fertilizer constraints can also persist long enough, as we transition from the spring planting season into the key growing season in early summer, pressuring food prices. Across all three outcomes, markets typically focus less on daily headlines and more on whether shipping and supply conditions normalize or deteriorate.
The war between Russia and Ukraine has continued for more than four years following Russia’s invasion of Ukraine, and cease-fire efforts have not produced a comprehensive agreement. The conflict matters to markets because it intersects with trade policy, energy flows, and the continued use of economic sanctions, which can influence business decisions and government priorities. Investors have learned to live with the headlines, but the persistence of the conflict can still shape how companies plan and how markets assess risk.
“Investors are navigating a lot of moving parts in 2026, including tariff uncertainty, a change in Federal Reserve leadership, and midterm elections along with ongoing overseas conflicts.”
Terry Sandven, chief equity strategist with U.S. Bank Asset Management Group
Oil prices surged in the immediate aftermath of Russia’s invasion in early 2022 as western nations moved to impose sanctions on a major supplier. That initial price spike proved short-lived, and subsequent geopolitical events have produced sharp moves that did not always persist. 4 This pattern does not reduce the seriousness of conflict, but it does show that markets often shift from fear to evaluation once investors can better gauge the scope of disruption.
“Investors are navigating a lot of moving parts in 2026, adding the Middle East conflict to tariff uncertainty, a change in Federal Reserve leadership and midterm elections,” according to Terry Sandven, chief equity strategist with U.S. Bank Asset Management Group.
“Inflation is kryptonite to stock valuations,” says Sandven. “If energy prices rise and the price of other goods follow, higher borrowing costs could temper corporate earnings.” This dynamic is one reason markets watch energy shocks closely, even when broader economic conditions remain resilient.
In early January, the United States conducted a large-scale strike against Venezuela that captured President Nicolas Maduro and his wife and brought them to the United States to face criminal charges. Despite the dramatic headlines, markets experienced limited disruption, reflecting investor expectations that the engagement would be short-lived and contained. The episode remains relevant because changes in governance and policy can affect energy investment and supply over time, even when markets treat the immediate event as temporary.
The broader lesson is that markets often respond most to conflicts that threaten supply routes, production capacity, or infrastructure that is difficult to replace quickly. When an event appears less likely to disrupt near-term supply, market reactions often fade as investors evaluate the economic impact with more clarity. This distinction helps explain why energy-linked conflicts can create sharp moves that later reverse when supply remains available and transport routes remain functional.
Geopolitical conflicts dominate headlines because they can constrain commerce, damage infrastructure, and create uncertainty about future policy choices. Markets often respond quickly, but those reactions can change just as quickly when investors conclude that the conflict is unlikely to broaden or disrupt real economic activity. A disciplined focus on long-term objectives can help investors avoid making lasting decisions based on short-term market swings.
In recent conflict episodes, stock prices have often recovered once investors assessed the scope and likely outcomes, and oil prices have sometimes cooled after an initial spike. U.S. stock markets have remained resilient at times, supported by broadly steady economic data, including persistently-solid consumer spending. These fundamentals can help anchor markets even when geopolitical headlines create short-term volatility.
Now may be an opportune time to connect with your wealth planning professional to discuss your portfolio’s alignment with your goals, time horizon, and comfort with market ups and downs. A thoughtful review can help you decide what matters most for your plan and what deserves less attention in the daily news cycle. That approach can help keep short-term headlines from driving long-term decisions.
Geopolitics refer to events that influence the global landscape, including political or trade tensions and military conflicts. Such events often create economic uncertainty, which can lead to fluctuations in stock prices, interest rates, and currencies. Geopolitical conflicts frequently impact supply chains, such as Iran’s threats to halt oil shipments through the Strait of Hormuz. Wars in agricultural regions can also affect crop yields and deliveries. Events like these can cause supply-demand disruptions, resulting in higher prices.
Geopolitical issues aren’t always related to military conflicts. Problems like new trade barriers or the formation of renewed alliances among previously unfriendly nations can also impact markets.
The emergence of new geopolitical conflicts often causes an immediate market reaction, frequently a negative one. If events are seen as disruptive to the global economy, investors may suddenly reduce portfolio risk and pursue a so-called “flight to quality.” This approach often results in a sell-off in stocks, with increased interest in bonds or “safe haven” assets like gold.
It is common for investors to overreact to initial shocks from geopolitical conflicts. Market declines are expected, but history shows that markets usually recover from these early negative impacts caused by major geopolitical events.
Oil prices can move quickly when investors fear disruption to shipping routes near major producers, even before supply is physically interrupted. When energy prices rise, markets may worry about higher inflation and slower growth, which can pressure stock prices in the short run. The impact often depends on whether higher prices persist long enough to influence household budgets and business costs.
The Russia-Ukraine war remains a persistent source of uncertainty because it intersects with trade policy, energy flows, and economic sanctions. Markets have adjusted to the ongoing conflict, but changes in sanctions, negotiations, or energy conditions can still influence prices and confidence. Investors often focus on whether developments change real economic activity or remain primarily a source of headline-driven volatility.
Geopolitical headlines can move markets quickly, but short-term swings do not always translate into lasting changes in the economy. Investors may benefit from reviewing how much risk they are taking and whether their strategy still fits their goals and financial plan. Talking with an advisor can help connect current events to a plan and keep short-term headlines from driving long-term decisions.
Investors are increasingly focused on how the administration’s policy changes are impacting markets and the economy.
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