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Despite the ongoing conflict between the U.S. and Iran, the stock market has not seen a major downturn, with the S&P 500, Dow Jones, and Nasdaq indices only falling by a few percentage points since the end of February. Experts say this is because investors are focusing on the long-term outlook, rather than getting rattled by short-term geopolitical events, which historically have had limited impact on the market.
Why it matters
The relatively muted market reaction to the Iran war highlights how investors have become desensitized to geopolitical shocks, instead concentrating on underlying economic fundamentals. However, a prolonged disruption of oil supplies or further escalation of the conflict could still trigger a more significant market decline.
The details
Since the U.S. attacks on Iran began on February 28, the S&P 500 has lost 4.31%, the Dow Jones has fallen 5.05%, and the Nasdaq has declined 3.57%. While these drops feel significant in the short term, they are relatively modest compared to historical market reactions to major global events. For example, the market fell 11% in the three months after the Pearl Harbor attack in 1941, and 14.4% in the month after Richard Nixon’s resignation in 1974. Experts note that external events often serve as triggers for profit-taking, rather than being the root cause of market declines.
- The U.S. attacks on Iran began on February 28, 2026.
- The market declines mentioned occurred over the following five weeks.
The players
Ben Carlson
A financial analyst at Ritholtz Wealth Management who observed that 5% market pullbacks are common, occurring on average every 1.8 years.
Kelly Bogdanova
An analyst at RBC Wealth Management who has documented how markets have historically recovered from geopolitical shocks within weeks or months.
Michael Metz
A late investment strategist at Oppenheimer & Co. who taught that the stock market typically rises during periods of economic growth and downturns, as long as investors know where things stand.
What they’re saying
“It feels like this drawdown should be worse than this given everything going on in the world.”
— Ben Carlson, Financial Analyst, Ritholtz Wealth Management
“After the 1990 Kuwait invasion, which knocked the market down by 16% over seven weeks, the market didn’t break even for an additional four months. But that was oil talking.”
— Kelly Bogdanova, Analyst, RBC Wealth Management
“The stock market typically rises in times of economic growth and economic downturns, as long as investors know where things stand on the turn of the wheel.”
— Michael Metz, Late Investment Strategist, Oppenheimer & Co.
What’s next
Investors will continue to monitor the situation in Iran, and any major developments such as a ceasefire or further escalation could trigger more significant market reactions. However, unless the conflict disrupts oil supplies or the broader economy, the market is likely to remain relatively calm and focused on long-term fundamentals.
The takeaway
The muted market response to the Iran war highlights how investors have become desensitized to geopolitical shocks, instead concentrating on underlying economic conditions. This suggests the stock market may be able to weather short-term uncertainty, as long as the conflict does not spiral into a broader economic crisis.
