New York
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The US war with Iran rippled through markets Monday: Oil spiked. Investors piled into gold. But stocks…shrugged?
Barely a week earlier, a fictional “macro memo from 2028” hypothesizing on how AI could disrupt the economy sent the Dow down 800 points.
Behold the stock market of 2026, where geopolitical conflict barely registers and the AI hype machine sends stocks tumbling.
Tuesday, investors had second thoughts: Maybe this war could actually disrupt the global economy. Stock futures were down sharply, with futures tied to the Dow 850 points lower, or 1.8%. Global markets also tumbled on Tuesday. South Korea’s Kospi led losses in Asia, closing down by 7.2%. Japan’s Nikkei and Hong Kong’s Hang Seng also closed lower. In Europe, London’s FTSE 100 was down 2.6% in afternoon trade. Germany’s Dax slid 3.4% and France’s CAC index was down 2.9%.
Stock market investors mostly care about companies’ profits and future expectations. While geopolitical conflict can whip up uncertainty, investors remain focused on market fundamentals that are largely unaffected so far.
“We know that usually when there’s conflict around the world, it doesn’t go on to materially impact the direction of US corporate profits, which are obviously the lifeblood of the equity market,” said David Stubbs, chief investment strategist at AlphaCore Wealth Advisory.
Global conflict and even war traditionally haven’t disrupted markets for very long. The biggest threat to the global economy and US stocks is an oil supply disruption, but the probability of a prolonged effect is low so far, analysts said.
“Geopolitical events have a long history of contributing to near-term volatility, but those disruptions typically do not have a sustained impact on the market’s longer-term growth trajectory,” Jason Pride, chief of investment strategy and research at Glenmede, said in a note.
Stocks opened lower Monday before investors stepped in to buy the dip. While headlines about military conflicts can be daunting, stocks historically have been able to rise regardless.
“History is littered with numerous meaningful events that were seen as near cataclysmic at the time” but ultimately were not detrimental for markets in the long-term, Pride said.
To be sure, some specific industries came under pressure Monday. Shares of cruise ships and airlines fell, but the broader market looked past concerns.
Investors had largely expected the Trump administration to take military action against Iran, limiting any shock.
“The signs were there,” Stubbs said. “The US military buildup had been in place for a long time.”
Strategists at Carson Group compiled a list of 40 major geopolitical and historical events across the past 85 years, ranging from Germany invading France in World War II to Iran attacking Israel in April 2024, and calculated the S&P 500’s return in the months following.
On average, the S&P 500 lost 0.9% in the first month after but rose 3.4% across the six months after the event.
“Historically, what in the near term seems like a geopolitical crisis tends to be largely resolved from a market perspective over the ensuing six months,” Ryan Detrick, chief market strategist at Carson Group, said in an email. “Yes, near-term volatility and potential weakness is common, but as you go out the returns are more positive.”
Investors across the past year have also been rewarded for buying other stock dips, potentially bolstering sentiment and contributing to stocks’ swift recovery Monday.
The S&P 500 is heavily concentrated in mega-sized technology companies, so enthusiasm about AI, robust corporate profits and interest rate cuts have all pushed markets higher.
To be sure, if the Iran conflict goes on for a while, it could hurt global oil flows and therefore affect stocks.
Stubbs at AlphaCore Wealth Advisory said one month would be manageable. “If there’s going to be a wider conflict and a longer disruption, then eventually parts of the equity market will start to pay attention,” he said.
But even then, other factors could carry more weight.
“The question of who is the winner from implementing AI and who is the loser is still going to be the dominant narrative in the market,” Stubbs said. “I think actually more dominant than the war in Iran for the US equity market.”
