How the US‑Israel‑Iran war will impact the stock markets

Explore how a U.S.-Israel-Iran war could impact stock markets: oil supply risks, safe‑haven rallies, defense winners, tech losers and investor guidance

Yuri Drabik

Feb 28, 2026

The coordinated U.S.‑Israel attack on Iran on Saturday, 28 Feb 2026 shocked investors and triggered a classic “risk‑off” response across global markets. Major U.S. indices sold off during Friday’s session and futures pointed lower for the week. Safe‑haven assets such as gold, U.S. Treasuries, the Japanese yen and Swiss franc rallied, while oil prices jumped. This article explains how a potential U.S.–Israel–Iran war could influence stock markets, drawing on recent events, historical precedents and energy‑market analysis.

Immediate market reaction

Equity indices fall. In the hours after news of U.S. and Israeli strikes on Iran, the Dow Jones Industrial Average fell about 1.05%, the S&P 500 slipped 0.43% and the Nasdaq Composite dropped 0.92%. Dow futures sank another 622 points in extended trading. The Free Press Journal expects Indian markets to open lower on Monday, with volatility spiking as foreign investors pull funds. Aviation stocks may be hit if airspace is closed or flights diverted.

Safe‑haven bid. Investors rotated into assets perceived as safe. Gold prices surged above $5,296 per ounce after rising nearly 11% in February. U.S. Treasury yields hovered near 3.95% for the 10‑year note as demand increased , while the Japanese yen and Swiss franc strengthened. Bitcoin and other cryptocurrencies retreated.

Energy prices jump. West Texas Intermediate (WTI) crude climbed above $67 per barrel and Brent crude rose to $72.64. Oil markets fear supply disruptions because Iran controls the Strait of Hormuz, through which roughly 21 million barrels of oil per day - around 21% of global supply - pass. The Free Press Journal notes that about 20% of the world’s crude is shipped through this narrow corridor. If the conflict escalates and the strait is disrupted, analysts believe crude could surge past $90–$100 per barrel and global inflation could re‑accelerate.

Why energy supply matters

The Strait of Hormuz is the world’s most critical oil chokepoint. IG’s analysis highlights that the current military build‑up has forced traders to price a geopolitical risk premium, pushing Brent above $70 for the first time since July 2025. The piece notes that a full shutdown of the strait is unlikely but “extreme downside risks” exist: closing the Strait could disrupt up to 21 million barrels per day of exports and push futures prices toward $100 per barrel or higher. Even without a total shutdown, heightened risk raises tanker insurance premiums and freight costs, increasing delivered oil prices for consumers worldwide.

Higher oil prices feed into inflation through energy, transportation and manufacturing costs. For energy‑importing nations, sustained high oil prices can worsen trade balances and weaken currencies. Equity markets often react negatively to sudden oil spikes because inflation pressures can lead central banks to keep interest rates higher for longer. Airlines, shipping firms and other energy‑intensive industries are particularly vulnerable , whereas energy producers benefit.

Sectoral winners and losers

Sector/Asset	Potential impact
Defense contractors	Likely beneficiaries. Defense firms such as Lockheed Martin, RTX and Northrop Grumman often rally when military tensions increase. They enjoy large backlogs, Lockheed Martin reported a $194 billion backlog by the end of 2025, while RTX’s backlog was about $268 billion. Governments also sign decades‑long maintenance and support contracts, creating recurring revenue beyond one‑off weapons sales.
Energy producers	Benefit from rising oil prices. If crude spikes above $90–$100 per barrel, integrated oil majors and exploration firms could see higher profits. Iran itself produces only 3%–4% of global oil , but supply disruption fears drive prices.
Aviation and transport	At risk. The Free Press Journal reports that aviation stocks could suffer if flights are cancelled or diverted. Higher fuel costs also pressure airlines and logistics companies.
Technology/growth stocks	Sensitive to higher interest rates and inflation. Economic Times notes that rising oil prices and inflation expectations could complicate Federal Reserve policy and pressure growth‑oriented stocks, especially on the Nasdaq.
Precious metals	Classic safe havens. Gold and silver have rallied sharply; gold gained nearly 11% in February and traded above $5,296 per ounce. Investors often rotate into metals during geopolitical crises.
Treasuries and safe‑haven currencies	Demand rises as investors seek safety. U.S. Treasury yields fell, and the Japanese yen and Swiss franc strengthened.
Cryptocurrencies	Risk appetite wanes. Bitcoin dropped below $64,000 following the strikes , reflecting a broader shift out of speculative assets.

Historical and scenario‑based perspective

Past resilience. In June 2025, Israel and Iran exchanged missile strikes over 12 days, but the conflict did not severely disrupt Gulf oil exports. The MSCI ACWI index actually rose 14.28% in the six months following the war. Iran’s economy is small and produces only 3%–4% of global oil, which limits its direct impact on the global economy. Invesco notes that supply growth was expected to outpace demand in 2026, suggesting the current episode is unlikely to cause a 1970s‑style oil shock.

Oil‑disruption scenarios. CSIS outlines possible military escalations and their effects on oil prices. If the U.S. or Israel simply disrupt Iranian exports (about 1.6 million barrels per day), oil prices could climb $10–12 per barrel. If Iran responds by attacking shipping in the Gulf, prices could exceed $90 per barrel. Attacks on Iran’s oil facilities could push prices above $100 per barrel , and Iranian attacks on Gulf facilities could trigger historic spikes, possibly above $130 per barrel. These scenarios illustrate the wide range of potential outcomes depending on the conflict’s scope and duration.

Short vs. long‑term impact. The Economic Times notes that geopolitical shocks often create sharp but temporary drawdowns unless energy supply is severely disrupted. If strikes remain limited, equity markets may recover quickly. However, a prolonged closure of the Strait of Hormuz or broader regional war could sustain high oil prices and inflation, delaying policy easing and weighing on equities.

Guidance for investors

Stay diversified and focus on fundamentals. Historical evidence suggests markets often rebound after geopolitical shocks, provided fundamental earnings drivers remain intact. Avoid making dramatic portfolio changes based solely on headlines.

Monitor energy exposure. Keep an eye on oil prices and the Strait of Hormuz. Investors in energy‑importing economies should be prepared for higher inflation and currency pressures. Exposure to energy equities or commodity funds can hedge rising prices.

Consider safe‑haven allocations. Gold, short‑term Treasurys and defensive stocks may help cushion portfolios when risk appetites shrink.

Beware of speculative surges. Defense stocks often rally initially but can retrace if the conflict de‑escalates. Evaluate company fundamentals and avoid chasing short‑term spikes.

Expect volatility. With markets already factoring in a war premium, daily swings could be large. Maintain a long‑term perspective and use volatility to rebalance rather than react rashly.

Conclusion

A US‑Israel‑Iran war would inject significant uncertainty into global markets, primarily through the energy channel. Investors have already sold equities and piled into safe‑havens as oil prices climb and inflation fears revive. Yet history shows markets can absorb shocks when energy disruptions are limited, and Iran’s share of global oil supply is relatively small. Whether this conflict becomes a temporary scare or a severe market event will depend on the scope of military action, the resilience of oil supply routes like the Strait of Hormuz and the ability of diplomats to de‑escalate. Staying disciplined and diversified is the best way to navigate whatever lies ahead.