The war in Iran is taking a toll on the U.S. economy.
Gas prices, one of the few bright spots when it came to the inflationary picture, have surged 17% since the conflict began. Meanwhile, crude oil prices have surged above $100/barrel for the first time since 2022 and may rise further as the war continues to disrupt oil exports from the Middle East.
After getting a brief bump after President Trump didn’t announce a strike on Iran during his State of the Union address, the S&P 500 is down 3.1% over the past month and down 3.8% from its January high. Lots of people were already worried the U.S. could be tipping into a recession, which would pull it down even further. In February, an economic model by the New York Fed showed an 18.7% chance of a recession by January 2027, and that was before the war even began.
But smart investors should resist the temptation to pull money out of the market. Every time a geopolitical crisis has rocked the S&P 500, patient investors have come out on top. Here’s why.
The drops have been short-lived
According to research by The Motley Fool, which tracked the S&P 500’s performance through every recession since 1980, stocks have always suffered during the early part of a recession. However, in most cases, the stock market at least partially recovers before the recession is even over. In some cases, it has even finished the recession at a higher level than it began.
And in all cases, it went on to reach even greater heights.