S&P 500 Performance During War, Geopolitical & Energy Crises
Considering the events that transpired over the weekend in the Mideast and the ongoing conflict with Iran we want to offer some perspective. Firstly, we send our sympathies to the families of the American servicepeople lost in battle and those injured as well as to the innocent bystanders in Iran, Israel and elsewhere harmed in this conflict. With that we want to be sure that we all take a measured approach to the markets in response to the conflict in Iran.
The Iran conflict has driven intense media attention over the past 48 hours. While the geopolitical backdrop is serious and rapidly developing, market behavior remains more measured than headlines suggest. Below is our dataβdriven view of what is happening β and what history tells us to expect. Nothing in the price action suggests a systemic crisis. If the Strait of Hormuz were fully blocked and markets anticipated a prolonged disruption, oil would likely be $90β100, or more, not $70β80.
In the accompanying table we compiled the relevant historical geopolitical events that had an impact on energy prices and/or sovereign boundaries. As you can see, the more drawn-out crises were accompanied by weaker markets.
We have also included the Gaza War that began on October 7. This was arguably the start of the chain of events leading to todayβs situation. It marked the beginning of the broader Middle East conflict over the past two and a half years. The Gaza War set off a chain reaction that ultimately led into the broader regional instability we are now seeing with Iran. On October 7, 2023, the S&P was already declining from its August 1 peak. S&P bottomed out three weeks later on October 27, 2023, at 4117.37, suffering a 10% correction. S&P was 32% higher 12 months later.
This is a serious geopolitical moment, and we continue to hope for safety for civilians and service members across the region. But from an investment standpoint, todayβs moves fit squarely within the historical norms of geopolitical shocks and energy crises. So far, nothing in the market suggests this is the beginning of a major bear market or a replay of past energy crises.
