The Iran Conflict 2 Months Later - Expectations vs Reality

Two months ago, the US surprised Iran with missiles and bombs on February 28th, and the fearmongering headlines poured in.  The weekend headlines were filled with collapsing stock futures, surging oil, the coming of surging inflation, political upheaval and so on.  After the shock wore off, astute investors have checked in with me regularly, asking about what type of investing opportunities have been presenting themselves.  Let's explore the common questions and investing themes that many of us think of when a major event like this happens, what our general expectations are with these questions, and what reality looks like two months later.

S&P 500

Probably the most frequent question I have been asked is "Am I losing a lot of money with what is happening with Iran?"  Our portfolios are diversified, but the S&P 500 provides a decent overview in the general direction of most people's performance.

S&P 500 February 27th, 2026 (Friday's market close before the war started): 6879

S&P 500 March 2nd, 2026 (Monday after the war started): 6882

S&P 500 April 28th, 2026: 7139

While there was indeed a roughly 8% pullback into the end of March, the S&P 500 has since rebounded and is solidly in the positive at the 2 month mark. The 8% pullback wasn't even deep enough to register as a normal market correction, which is defined as a market drop of more than 10% and less than 20%.

Oil

The next most common question had to do with the price of oil.  Most people have wondered if the price of oil will stay high with the dual blockades happening in the Strait of Hormuz, while I postured two months ago that oil prices should settle down within the sixty day window.  I wanted to see what would actually happen, and now we can update the chart fully.

While oil prices are slightly down from their peak price, they still remain quite elevated and have not retreated in a material enough manner relative to the start of the war.  It's actually the smallest percentage drop from peak pricing after 2 months, compared to prior conflicts.  At this time, we continue to feel the pain at the pumps.

Oil Investment Opportunities?

What about various investment opportunities in oil, how have those performed since the first possible trading day after the start of the war?

Exxon Mobil stock (XOM): $154.22 on March 2nd, $150.56 on April 28th (-2.4%)

Chevron stock (CVX): $189.60 on March 2nd, $188.36 on April 28th (-0.07%)

State Street Energy ETF (XLE): $57.04 on March 2nd, $57.71 on April 28th (+1.2%)

State Street Oil and Gas ETF (XOP): $159.56 on March 2nd, $171.65 on April 28th (+7.6%)

Oil prices have increased over 35% since the start of the war, yet the majority of investment opportunities for most investors don't appear to reflect such an increase.

Gold, the Safe Haven Asset?

Gold, which is customarily accepted by many as a safe haven asset, had spiked shortly after the conflict started to $5396/ounce on March 2. However, about a week later, the price had already retreated to $5205.  I previously suggested that gold already made big gains a year prior, and there was a possibility that it could even decline further in value.  But that was just one week into the war. What about the flight to quality during continued times of uncertainty, or dollar weakness and inflation during energy price shocks? Shouldn't that keep gold prices elevated?

Gold Price on April 28th: $4583/ounce. That is a roughly -15% decline since the start of the war.  If someone were looking to rotate into a safe haven asset, presumably for "safety", would that type of volatility be reasonable in a 2 month time frame?

Defense Stocks

There was a section I failed to consider when the war started but became a frequently asked question: "How are defense stocks such as Raytheon / Lockheed / Northrop doing?" As we have seen in headlines since the start of the war, the US is running low on weapons stockpiles and will need several years and hundreds of billions of dollars to rebuild those stockpiles.  This should be wonderful news for defense companies and provide a terrific investment opportunity, right?  Right...?

Raytheon, maker of Tomahawk cruise missiles and Patriot defense systems (RTX): $212.16 on March 2nd, $175.68 on April 28th (-17.2%)

Lockheed Martin, maker of F35s and F22s among other weapons of war, recently signed a deal to quadruple production of THAAD interceptors (LMT): $676.70 on March 2nd, $512.29 on April 28th (-24.3%)

Northrop Grumman just 2 weeks ago was awarded a new contract to develop missile interceptors (NOC): $768.02 on March 2nd, $577.72 on April 28th (-24.8%)

Palantir, provider of AI and data software crucial for military intelligence (PLTR): $145.17 on March 2nd, $141.18 on April 28th (-2.7%)

So what exactly happened here? Well, they did all jump on that first day the market opened on March 2nd, but up until this point it's been pretty much all downhill from there.  Could it be possible that since all of these companies had incredible 2025 stock performances, that maybe they were simply due for a correction? Could it be possible that as the retail investor grew eager to buy in on the war news, the institutional players were viewing this as an opportunity to lock in their profits?

Cause Equals Effect. Absolutely. Probably. Well, maybe...?

At some point you may have come to think that a certain event (cause) will lead to a certain result in the markets (effect). After hearing what happened in the news and making your portfolio decisions, when you look closely, did the results sometimes seem backwards or counterintuitive to your logic? The past two months have been a prime example that markets don't always react to events the way we might expect.  Is your portfolio aligned with today's reality, or yesterday's assumptions?  If you're not sure, reach out to me and let's have a discussion.