Will the US-Iran conflict "crash" the US stock market? Lessons from history: No need to worry, the S&P 500 will rebound quickly!

Cailian Press, March 9 (Editor: Huang Junzhi) Since the beginning of the year, U.S. stocks have repeatedly retreated amid President Trump’s “tariff stick” and the fading of AI trading. In the past two weeks, the situation has become more complicated after the U.S. and Israel jointly attacked Iran.

The S&P 500 index has “fallen continuously,” while international oil prices once approached $120 per barrel, reaching the highest level since late 2022. Generally, rising oil prices reduce corporate profit margins and decrease consumer spending, thereby harming the economy. Additionally, high oil prices can exacerbate inflation, which may force the Federal Reserve to maintain high interest rates for a longer period. This is clearly bad news for the stock market.

However, history shows that investors don’t need to worry too much: when oil prices previously surged due to geopolitical uncertainties, U.S. stocks quickly rebounded afterward. Analysts point out that the S&P 500 usually declines during periods of geopolitical uncertainty, but it can also rebound rapidly.

For example, during the Russia-Ukraine conflict in February 2022, Brent crude oil prices temporarily broke through $120 per barrel and remained high throughout the year. But after Brent crude fell below $80 in December 2022, the S&P 500 rose 17% over the following year.

Stuart Katz, Chief Investment Officer of Robertson Stephens, said, “Looking back over the past few decades, major geopolitical events typically cause the market to fall by about 5% to 10% from peak to trough. However, within 12 months after these triggering events, the market is usually in an upward trend.”

Analysts suggest that the extent of the S&P 500’s decline and the speed of its rebound depend on whether the U.S.-Iran conflict escalates or de-escalates in the coming days or weeks. If oil prices continue to rise, the stock market may further decline. But every previous decline in the S&P 500 has been followed by a successful rebound, and there’s no reason to believe this time will be different.

Anshul Sharma, Chief Investment Officer of Savvy Wealth, said, “From historical experience, geopolitical shocks cause intense short-term market volatility, but rarely have a substantial impact on long-term earnings trajectories.” In other words, in hindsight, geopolitical uncertainties are often good buying opportunities because stock prices fall for reasons unrelated to a company’s long-term growth prospects.

Another analysis also indicates that such situations won’t last forever, even if the war continues for a long time.

This analysis studied the performance of oil, gold, and stocks during past geopolitical shocks and found a familiar pattern: prices tend to surge or plummet in the first few days of trading, but usually recover within a few weeks, even if the fighting drags on.

The analysis used the 12-day conflict between Israel and Iran in June last year as an example. During that conflict, U.S. forces intercepted Iranian attacks and bombed Iran’s nuclear facilities. The conflict broke out on June 13, 2025, immediately causing oil and gold prices to soar and stock markets to decline. But 30 trading days later, the trends in the three major markets were completely opposite:

From June 12 to 13, Brent crude oil spot prices rose nearly 7.3%. However, according to the U.S. Energy Information Administration’s price analysis, after 30 trading days, prices actually fell by 0.6%.

Gold also showed a similar pattern. Data indicated that during the conflict, gold prices once rose by 1.49% in a single day, but after 30 trading days, they actually declined by 1.39%.

The S&P 500 index also followed a similar trend but in the opposite direction — it fell 1.13% on the first trading day after the bombs started falling, then rose 5.70% after 30 trading days.