War in the Middle East Does Not Scare Smart Money: History the Great Teacher

by: Jeffery A. Keill, CFP, CIM, FMA, FCSI, CEA

Portfolio Manager and Senior Wealth Advisor

The famed baseball catcher Yogi Berra once said:” It’s déjà vu......all over again!” In my thirty plus years working to help clients build real wealth, I once again see ourselves walking through a period of conflict in the Middle East. This often triggers headlines, market volatility, and therefore raises investor anxiety. This is a time when we, as investors, need to zoom out from the sensational details of the new media. When we take a look at over a century of market history, a consistent pattern emerges. Geopolitical shocks create turbulence in the short-term, yet long-term investors have repeatedly seen markets stabilize and recover. Every time. The smart money has learned this lesson. The news might provide us with facts in the moment, but we should take lessons from history as it is truly the teacher of wisdom.

Short-term Shock is Normal

Market reactions to Middle East conflicts tend to follow a familiar pattern. Initial volatility as investors price in uncertainty, especially around oil supply and global trade routes. For example, the S&P 500 typically drops about 1-2% in the first week after geopolitical shock, followed by rapid stabilization once the immediate risk becomes clearer. Even after sharp early declines during recent conflicts, markets often rebounded within days.

Recovery Within 12 Months in Most Historical Cases

According to CNBC report- across 17 global conflict events since 1939, the S&P 500 posted an average 12- month gain of 2.9%. I’ll grant you, this is not much of a gain, but it is far different than the fear that keeps us skeptical, afraid, and out of the market.

Oil Shocks Matter- But They Don’t Last Forever

Because the Middle East is central to global energy supply, conflicts often spark fears of oil shortages. Historically oil prices may spike early, like they are now, especially when shipping routes like the strait of Hormuz are threatened. Again, when we look through the lens of history, in six of seven major Middle East conflicts since 1970, oil surges were not sustained and prices normalized within months.

The exception was the 1973 Yom Kippur War oil embargo which coincided with broader economic problems like inflation and recession. This is a key lesson: geopolitics become most disruptive when they amplify existing economic weaknesses.

Equities Have Historically Rebounded- Even During Major Wars

Looking across more then a century of market data, we can see that during both World Wars U.S. stocks ultimately gained 115% combined despite enormous global turmoil. Even during the Gaza War (2023), the S&P 500 was up 32.2% one year later. The pattern is unmistakable: markets dislike  uncertainly, but they adapt quickly.

What Does the ‘Smart Money’ do During These Times?

1. Volatility is Not a Signal to Abandon Your Plan

History shows that selling during conflict-driven dips often mean locking in losses right before markets recover. If you are a net accumulator of wealth, these market fluctuations are not to be feared but taken advantage of.

2. Diversification  Remains Your Best Defense

Energy shocks, currency swings, and supply chain disruption affect sectors differently. A diversified portfolio absorbs  these shocks more effectively. Diversification, although not really sexy, is one of the strongest allies to smart investors.

3. Focus on Fundamentals, not Headlines

Geopolitical events create noise, but long-term returns are driven by earnings, innovation, demographics, and economic growth - not short-lived crises. Regardless of the geopolitical games played and the rhetoric abundance in the media, smart investors remain committed to focusing on the fundamental drivers of wealth.

4. Patience is the Quiet Strategic Advantage

Investors who stayed invested through past conflicts were rewarded as markets normalized. This is not about being complacent, but diligent in your approach to being patient and being active in your resilience.

For the smart investors committed to disciplined strategy, these periods are not a reason to panic-they’re a reminder why patience, diversification, and perspectives matter. I know there are some investors who will not heed the lessons and wisdom from history. This is unfortunate. Others, however, will learn from history, become resilient, steadfast and take advantage of these moments.

In short time, be it weeks or months, we will be repeating Yogi Berra’s statement when markets once again repeat their upward trajectory.

Posted March 2026