This historical indicator says buy S&P 500 now during the Iran conflict

Amid escalating tensions in the Middle East involving U.S., Israeli, and Iranian forces, oil prices have surged, and global markets have turned volatile.

Now, historical patterns suggest the current dip in the S&P 500 may present a buying opportunity for long-term investors.

In this line, analysis by charting platform TrendSpider, examining the S&P 500’s one-year performance following major Middle East conflicts, shows a pattern of strong recoveries.

In an X post on March 10, the firm noted that after the Iranian Revolution in 1979, the index gained 32% over the following year. The outbreak of the Iran-Iraq War in 1980 was an outlier, with a 7% decline, influenced by broader economic pressures, including high inflation and energy disruptions.

Subsequent events produced stronger outcomes: the Gulf War in 1990 was followed by a 23% gain, the Iraq War in 2003 by a 33% increase, and the Israel-Hamas conflict that began in 2023 by a 36% rise over the next 12 months.

The pattern suggests that while geopolitical shocks often trigger short-term declines, frequently linked to surging energy costs and uncertainty, the S&P 500 has historically rebounded once initial fears fade and the economic impact proves limited.

Average drawdowns during such events are typically modest, often in the single digits to low teens, with recoveries occurring within weeks or months. 

Broader studies of geopolitical crises show stocks often post positive returns one year after conflicts begin, as corporate earnings and economic fundamentals outweigh prolonged war-related disruptions.

Market reaction to Iran strikes 

The current tensions with Iran have already produced familiar short-term effects, including a spike in crude oil prices that has pressured equities and raised inflation concerns. 

Overall, financial markets remain cautious, with the S&P 500 down nearly 1% year-to-date at 6,795 as of press time. 

Energy companies such as Exxon and Chevron have gained on higher oil prices, while defense contractors, including Northrop Grumman and Lockheed Martin, have risen on expectations of increased military spending.

In a short escalation lasting four to six weeks, oil could briefly rise before stabilizing near $70 by year-end, with limited effects on global growth and inflation. A prolonged conflict, however, could push Brent above $130, triggering an inflation shock, delaying rate cuts, and increasing recession risks.

Featured image via Shutterstock