How Global Conflict Is Affecting the Market and What Investors Should Know

Global conflicts and rising oil prices can rattle markets, but history suggests volatility doesn't always mean lasting damage. Discover why staying patient and diversified matters most for long-term investors.

Last Edited by: LPL Research

Last Updated: April 10, 2023

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IN THIS ARTICLE:

News about wars, oil prices, and global trade can feel unsettling for investors. The ongoing military conflict in Iran and disruptions through the Strait of Hormuz have pushed oil prices higher and sparked sharp market swings. Headlines like these often raise an important question. Should investors be worried about lasting damage to their portfolios?

Recent LPL Research commentary and analysis suggest a more measured answer. Markets feel stress in moments like these, but stocks have often been more resilient than many expect, especially when economic conditions and company profits remain solid. Past performance does not guarantee future results.

Markets and Conflict: What History Shows

Major conflicts tend to create uncertainty, and uncertainty often leads to selling pressure. However, history shows that stocks have often bounced back once investors gain more clarity, though past performance does not guarantee future results. According to LPL Research, when wars or large military operations have occurred without triggering a recession, the stock market has typically recovered within a matter of months, not years.

On average, the S&P 500 has experienced short‑term declines of about 7% during these events and has often regained lost ground within two months.

In the current case, investor focus remains on oil prices and whether shipping lanes through the Strait of Hormuz reopen. These factors influence inflation expectations and short‑term market swings.

Why Oil Prices Matter So Much Right Now

Energy acts as the main link between global conflict and the broader economy. When oil prices rise, businesses face higher costs and consumers may feel pressure at the gas pump, as one example.

The LPL Market Signals Podcast highlights that recent oil prices and shipping patterns are key indicators to watch. If disruptions remain temporary, history suggests markets can stabilize. Longer‑lasting supply issues would likely create more market stress. For now, long-term oil prices suggest investors do not expect permanently higher energy costs.

How Investors Have Been Reacting

During March, many investors became more cautious. Exchange-traded fund (ETF) flows data shows investors favored core bonds. This type of shift often happens during periods of uncertainty. It reflects a pause, not panic.

However, despite the drawdown in stock performance, investors continued to pour into equity ETFs, with non-U.S. equities drawing the largest flows.

Earnings Are Still Doing the Heavy Lifting

One reason markets have held up is that companies are still expected to grow profits over the next year and beyond. Strong earnings help support stock prices over time, even when news is unsettling.

LPL Research points out that markets have historically handled periods of conflict better when earnings growth stayed intact. For now, forecasts suggest company profits remain resilient heading into the second half of 2026.

Key Takeaways for Investors

Here's what to keep in mind:

  • Market swings during global conflicts are common and often temporary
  • Energy prices play a bigger role than headlines
  • Investor caution can be a stabilizing force
  • Strong earnings matter over time

Staying patient, diversified, and focused on long‑term goals remains an effective response during uncertain periods.

 

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GLOBAL CONFLICT VS THE MARKET FAQS

Global conflicts do not always result in lasting market drops. Historically, many market pullbacks tied to geopolitical events have been temporary, especially when economic growth and corporate earnings remained intact. Markets tend to focus less on the event itself and more on whether it disrupts the broader economy. When conflicts remain contained and do not trigger recessions, markets have often recovered over time.

Markets often remain volatile even after positive news because investors test confidence before settling into a clearer trend. After major events or announcements, there can be a period of back-and-forth trading as investors reassess risks, valuations, and positioning. This kind of choppiness is a normal feature of markets and doesn’t necessarily signal that good news has lost its importance.

During uncertain markets, the most productive focus is usually on long-term goals rather than short-term headlines. Maintaining diversification, staying aligned with a long-term plan, and avoiding emotional decisions can help investors navigate volatility more effectively. Periodic reviews of a portfolio can provide reassurance without needing to react to every market swing.

Disclosures

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. ​

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. ​

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. ​

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. ​

All investing involves risk, including possible loss of principal. ​

US Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. ​

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The PE ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher PE ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower PE ratio. ​

Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio. ​

Precious metal investing involves greater fluctuation and potential for losses.

The fast price swings in commodities will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors.​

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Indexes are unmanaged and cannot be invested in directly.

The MSCI US Broad Market Index captures broad U.S. equity coverage. The index includes 3,204 constituents across large, mid, small and micro capitalizations, about 99% of the U.S. equity universe. Indexes are unmanaged and cannot be invested in directly.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. Private credit carries certain risks — illiquidity, opacity, borrower concentration, and bespoke structures — that distinguish it from corporate bonds and bank loans and complicate its evaluation and oversight.

All index data from FactSet or Bloomberg.

This research material has been prepared by LPL Financial LLC.

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