How to Invest as the Iran War Evolves? Experts Say Don't Just Run for the Hills—or Buy the Dip

Key Takeaways

• Spot gold prices climbed, crude oil prices sank, and U.S. stocks rose on Tuesday.
• The whipsaw action has posed challenges for investors. Market strategists advise moving slowly and avoiding extremes.

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Investors may be having a hard time working out what’s next in the Middle East. Some advisers suggest they shouldn’t try.

Major asset classes are whipsawed as investors tried to determine how long the war in the Middle East will last. The messaging, analysis and market signals seem to conflict from hour to hour, making how to proceed it all the more difficult to determine.

The price of West Texas crude, for example, both surged to above $115 per barrel and dumped to around $85 yesterday. (Read Investopedia’s full daily markets coverage here.) The price of gold did precious little following the outbreak of war, only to start climbing after President Donald Trump teased an end to hostilities. U.S. stocks are seemingly up one day, down another. The Wall Street “fear gauge” known as the VIX is jumping between fear and relative calm.

As markets move fast and break trends, strategists and experts advise investors to go slow and avoid extreme positions.

WHY THIS MATTERS TO YOU

Market strategists are advising investors to reevaluate their portfolios for risk and to avoid extreme positions in stocks one way or another. That may be a wise perspective if you’d prefer not to attempt to predict the effects of day-to-day headlines on various assets.

Though Trump in an interview yesterday with CBS News said the U.S.'s war with Iran is “very complete, pretty much,” he also threatened to escalate in a social media post later in the evening. “If Iran does anything that stops the flow of Oil within the Strait of Hormuz, they will be hit by the United States of America TWENTY TIMES HARDER than they have been hit thus far,” he said in a social media post. Defense Secretary Pete Hegseth this morning indicated that the fighting will not end “until the enemy is totally and decisively defeated.”

The fluidity of the situation calls for a plan, according to UBS, which in a recent note said investors should plan around the question “if the conflict persists for six months and oil remains elevated, what would I want my portfolio to look like?”—and then space out changes between what their investments look like today and their goal.

“We do not believe equity investors should ‘run for the hills’ nor should they be reflexively ‘buying the dip,’” UBS wrote.

The end of a war would depend not just on the leadership of U.S. and Israel but also Iran. Though risk assets rebounded following Trump’s initial missive indicating the pending end of war, “the outcome depends on Iran’s response, leadership cohesion, and willingness to return to negotiations,” BCA Research’s Felix Vezina-Poirier wrote Tuesday.

The state of leadership in Iran makes the future uncertain, Jared Cohen, Goldman Sachs’ president of global affairs and the firm’s Iran expert said in an interview with CNBC. Cohen said his contacts in Iran said there’s an assumption that the now-deceased leadership in Iran “set in place a decentralized war machine that is effectively running on autopilot.”

“There’s no leader in Iran that has the authority, the information, and the access to that decentralized machine to guarantee cessation of activities,” he wrote. “So it’s not clear to me what the off-ramp looks like.”

That lack of clarity, some analysts believe, is a sign that investors should tread cautiously.

“Our key message for investors dealing with these unnerving headlines and market volatility is simple,” LPL Financial wrote Monday. “Be patient. Stay diversified. Maintain balanced portfolios that include some investments well-positioned for volatility. Look for opportunities on the other side. Those who ride out the ups and downs, in time, will be grateful they did.”

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