The Iran War and Your Portfolio: Historical Stock Market Patterns

The A rising war in the Middle East Shocked the stock market Tuesday – The reaction that history suggests after a global shock is common, but often short-lived.

while the The market rebounded On Wednesday morning, the Standard and Poor’s 500 IndexA broad measure of how US companies’ stocks are doing, Closed on Tuesdays down 0.94%. The Dow Jones Industrial Average Decreased by 0.83% and loaded with technology Nasdaq Composite Index Decreased by 1.02%. However, the day before, All three were down at least 2.5%.

The decline earlier in the day was largely due to concerns over disruptions in global trade, including oil flow, Pending an announcement by President Donald Trump, the US will allow ships to pass through the Strait of Hormuz, a key maritime route.

History suggests that stock market volatility is par for the course.

According to a Stock Trader’s Almanac analysis of 17 events since 1939, the average one-week decline of the S&P after an initial geopolitical shock is 1.09%.

The largest one-week gain was 13.51% after Germany invaded Poland on September 1, 1939, which is generally considered the start of World War II. The biggest one-week loss was 17.90% when Germany invaded France on May 10, 1940. The S&P lost 5.55% and 20.87%, respectively, in the year following each event, according to the analysis.

More recently, the S&P gained 3.27% in the first week after Russia invaded Ukraine on February 24, 2022. A year later, the index was down 6.05%.

However, the economic backdrop was “very weak” in the weeks and months after the attack, said Jeffrey Hirsch, editor-in-chief of the Stock Trader’s Almanac. “The writing was on the wall that inflation was going to rise.

“At this point, the economy appears to be on a more stable footing,” Hirsch said.

However, “it’s still very early in this conflict,” Hirsch said. “So far, the market is not saying it will be removed. I think oil will be very high.”

Oil prices rose after the US-Israeli attack on Iran It has since been withdrawn.

Historically, 12 months after a new crisis, the S&P has averaged a 2.92% gain, according to the Stock Trader’s Almanac analysis. The biggest jump was 32.2% in a year after the Gaza war began on October 7, 2023. The largest one-year loss since the Arab oil embargo, which began on October 19, 1973, was 34.30%.

There is no telling where the market goes from here. The CBOE Volatility Indexwhich measures expected volatility in the S&P over the next 30 days, was at about 23 as of Tuesday. By comparison, the index had moved to 52.3 in April 2025 when the market fell due to the new rates and the uncertainty surrounding them.

“If you have an investment strategy, stick to it,” says certified financial planner Lee Baker, founder, owner and president of Claris Financial Advisors in Atlanta and a member of the CNBC Financial Advisory Council. “Don’t change it because you think, ‘Oh no, we’re going to war, this is the end, I’m going to lose all my money’ – that kind of thinking.”

For long-term investors — those who don’t need to tap into their assets for years, if not decades — financial advisors generally recommend being prepared to weather any market storm.

Research shows that missing the stock market’s best days — even in bear markets — can cost investors dearly, research shows.

For example, if you missed 10 of the best days in the market over a 30-year period until 2024, your return would have been halved. According to Hartford Funds. And missing the best 30 days would have reduced your returns by 83%. Additionally, the research found that 78% of the best days in the stock market occurred during either a bear market (50%) or the first two months of a bull market (28%).

However, if market volatility is making you particularly nervous, financial advisors say that’s a sign you need to reassess. Risk capacity and risk tolerance. They capture how much time you have until you start using the invested money and how well you can withstand the ups and downs of investing in the stock market.

“It usually involves some minor changes” in your portfolio, Baker said, such as 80% equities and 20% bonds, 75%, 70% or 60% equities and the rest bonds.

“If you do, it usually doesn’t lock in a big loss,” Baker said. “If you can sleep at night, it’s worth taking some risk off the table.”