As widely reported in the news, 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, dubbed "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 continues to develop rapidly, and the safety of civilians in the region and U.S. troops remains the foremost concern. Without diminishing the gravity of these events, investors will understandably have questions about the implications for markets, oil prices, and their portfolios.

President Dwight D. Eisenhower once said that "plans are worthless, but planning is everything." Applied to today, the lesson is that specific geopolitical events are unpredictable, but the fact that they occur regularly is not. Structuring a portfolio and making financial plans is designed precisely to address this kind of uncertainty. While every event is unique, financial markets have successfully navigated countless wars, crises, and regional conflicts, including the U.S. operation in Venezuela earlier this year.

The key for long-term investors is to separate geopolitical headlines from portfolio decisions. What should investors keep in mind as events continue to unfold in the coming weeks?

The current strikes are the latest development in a long-running story

Although the scale of the current strikes is significant, tensions among the U.S., Israel, and Iran have been building for some time. This latest escalation follows a monthlong U.S. military buildup in the region, failed negotiations over Iran’s nuclear program, and President Trump’s pledge to support Iranian protesters who challenged the regime earlier this year.

To understand how events reached this point, it is helpful to consider the broader historical context:

• Tensions between Iran and the West span several decades, including the Iranian regime’s longstanding support for Hezbollah and Hamas, which have been central to conflicts throughout the Middle East.

• In 2019, Iran launched drone strikes against Saudi Arabia’s oil infrastructure, temporarily disrupting global oil production and raising fears of a wider regional war.

• Hamas’s October 2023 attack on Israel reignited conflict in the region, eventually drawing in Hezbollah and escalating tensions with Iran.

• Last summer, Israel conducted a 12-day military campaign against Iran, targeting nuclear and ballistic missile programs in what was the most direct confrontation between the two countries in decades.

• Earlier this year, Iranian protesters challenged the regime, with President Trump pledging U.S. support.

• Negotiations over Iran’s nuclear program ultimately failed to produce an agreement. In recent weeks, a significant U.S. military buildup in the region signaled that a broader operation was being planned, culminating in the current strikes.

The scope of the latest strikes, including the targeting of Iran’s senior leadership, is broader than previous engagements. That said, history also demonstrates that such conflicts are not always a catalyst for sustained market movements.

Oil markets and the Strait of Hormuz

For investors, the most direct channel through which Middle East conflicts affect financial markets is global energy prices. Iran is a member of OPEC and produces around 3 million barrels per day of oil, and 27 billion cubic feet per day of natural gas. The country also borders the Strait of Hormuz, the world’s most critical energy waterway. According to the U.S. Energy Information Administration, approximately one-third of all seaborne oil exports and one-fifth of natural gas passes through this region. Even the threat of disruption to this vital waterway could have significant implications for global energy markets.

Oil prices had already been rising in anticipation of the strikes. The immediate reaction has been a further increase, with WTI moving into the low $70s and Brent crude rising to just under $80 per barrel. While western countries do not directly import oil from Iran, the global nature of oil markets means that any supply disruption can drive prices higher.

Some perspective is warranted, however. Current oil prices remain well below the 2022 peak of nearly $128 per barrel, reached when Russia invaded Ukraine. The current environment is also meaningfully different. Since 2018, the U.S. has been the world’s largest producer of oil and natural gas, with domestic production exceeding that of other major producers such as Saudi Arabia and Russia. While the U.S. still participates in global energy markets, this level of domestic production provides a degree of insulation from supply disruptions.

It is also worth bearing in mind that oil prices are inherently difficult to forecast. When Russia invaded Ukraine, many anticipated that prices would remain elevated for an extended period. Instead, prices stabilized and declined far sooner than expected. Similarly, the U.S. operation in Venezuela in January of this year caused a brief move in oil prices but had little lasting effect.

The importance of remaining invested during geopolitical uncertainty

For long-term investors, one of the most important lessons from past geopolitical conflicts is the value of staying invested. It is natural to feel unsettled when news coverage describes military strikes, retaliatory attacks, and the prospect of a wider regional war. These events carry real human consequences and stand apart from the typical flow of market news focused on earnings, valuations, and economic data.

The accompanying chart illustrates that markets have managed to navigate even the most serious global events. From World War II to the Gulf War to the wars in Iraq and Afghanistan, markets experienced short-term volatility but were ultimately driven by economic fundamentals over the long run. More recently, the conflicts between Russia and Ukraine, and between Israel and Hamas, introduced uncertainty but did not derail the broader market trajectory.

It is also important to note that Iran plays a minimal direct role in investment portfolios. Iran has been subject to heavy sanctions for years, and its economy has been experiencing hyperinflation, with its currency, the Rial, collapsing in value. As a result, very few investors have direct exposure to the country within their asset allocations.

Markets may experience volatility in the coming days and weeks as the situation continues to develop. Oil prices could move higher, and uncertainty may weigh on investor sentiment. However, attempting to time these moves has historically proven counterproductive. Markets have demonstrated a capacity to rebound unexpectedly, and missing even a handful of the best trading days can meaningfully reduce long-term returns.

The bottom line? The U.S. and Israeli strikes on Iran represent an important geopolitical development. However, history shows that investors who maintain diversified portfolios aligned with their long-term financial goals are best positioned to navigate periods of uncertainty.