War headlines have a way of sending investors running for the exits. Oil spikes, markets sell off, and the panic feels entirely rational in the moment.
But JPMorgan has a message that might surprise you. In its geopolitical market analysis, the bank argues that concerns about war’s lasting impact on equities are largely overstated. History, it says, is on the investor’s side.
That does not mean the risks aren’t real. It means understanding what history actually shows could make the difference between panic selling and smart positioning.
What JPMorgan’s research actually shows
JPMorgan has studied geopolitical shocks going back decades. Its conclusion is pointed: Geopolitical events do not tend to have lasting effects on globally diversified equity portfolios.
The short-term volatility is real. The long-term damage, historically, is not.
The bank points to the Russia-Ukraine invasion of 2022 as a clear example. Markets sold off sharply in the days that followed. Then they recovered. The S&P 500 climbed from its invasion lows. The fear proved worse than the fundamental outcome for equities.
The Gulf War in 1991 followed the same pattern. So did the Korean War. So did Vietnam. In most cases, defense spending increased, GDP held up, and equity markets ground higher within months of the initial shock.
The Iran conflict is the immediate test case
The current flashpoint is the U.S.-Iran conflict and the threat to the Strait of Hormuz, through which roughly 20% of the world’s oil supply flows. When tensions escalated, Brent crude surged 13% in a single session, briefly touching $120 per barrel, as markets priced in a worst-case scenario, MarketMinute reported.
JPMorgan and Goldman Sachs both warned that a prolonged Strait closure could push oil to $150 per barrel or higher. That spooked markets badly. The Dow fell more than 1,000 points that day. The S&P 500 and Nasdaq each dropped more than 2.4%.
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But JPMorgan’s own research suggests the oil spike may not last. The bank notes that even dramatic geopolitical events this year, including U.S. strikes on Iranian nuclear facilities, barely moved oil prices over the medium term.
Saudi Arabia holds significant spare capacity. U.S. shale output is at record levels. The global buffer is larger than the headlines suggest.
What history shows about markets and major conflicts:
- The S&P 500 climbed from its lows following the Russia-Ukraine invasion in 2022, recovering sharply within months, despite the war continuing.
- The Gulf War in 1991 saw the Dow Jones climb through the peak of combat operations as defense spending boosted GDP.
- The 1973 Yom Kippur War and oil embargo is JPMorgan’s own example of the rare exception, where a geopolitical shock caused lasting equity damage tied to a structural oil supply crisis.
- In most other conflicts since World War II, equity markets recovered within three to six months of the initial shock, according to JPMorgan’s geopolitical analysis.
The sectors moving right now and why
Even as the broader market sold off, certain sectors moved sharply higher. Defense stocks surged immediately. Raytheon (RTX) jumped 6.2% and Lockheed Martin (LMT) gained 2.9% as the prospect of sustained regional conflict accelerated procurement timelines and swelled order backlogs.
Energy majors also moved. Exxon Mobil (XOM) and Chevron (CVX) both rallied as oil prices spiked. BP and Shell gained on European supply fears. These are the classic war rotation trades, and they played out exactly as historical precedent would predict.
Sectors Wall Street is watching closely:
- Defense contractors including Lockheed Martin, Raytheon, and Northrop Grumman, which benefit directly from rising military procurement and expanded defense budgets
- Energy majors such as Exxon, Chevron, and Occidental Petroleum, which gain from oil price spikes but face pressure if a prolonged conflict disrupts global trade flows
- Tech and the Magnificent 7, which largely held their ground as investors treated the sell-off as a rotation opportunity rather than a structural exit from growth stocks
- Gold, which surged toward record highs as a safe haven before pulling back on profit-taking, consistent with its typical behavior in early-stage geopolitical shocks
The risk that JPMorgan says investors cannot ignore
JPMorgan is not telling investors to ignore the conflict. Its own geopolitics team dialed back bullish calls on emerging market currencies and local bonds, specifically because of the Iran war risk. That is a meaningful signal.
The bank’s researchers draw a clear line between geopolitical shocks that disrupt equity markets temporarily and those that cause structural damage.
The 1973 oil embargo falls in the second category. That shock was different because it triggered a sustained supply constraint that fed directly into inflation, crushed consumer spending, and ultimately broke the economic cycle.
Zamek/VIEWpress on Getty Images
The question investors need to answer right now is which category the Iran conflict belongs to.
If the Strait of Hormuz closure is brief and Saudi spare capacity absorbs the supply gap, history says buy the dip. If the conflict escalates into a prolonged regional war with sustained oil disruption, the calculus changes entirely.
What JPMorgan says investors should do now
JPMorgan’s broader 2026 outlook remains constructive. The bank expects equities to end the year higher, with conviction in technology, utilities, financials, health care, and industrials. It views geopolitics as a core theme to position around rather than run from.
Specifically, JPMorgan recommends playing both offense and defense. Offense means owning beneficiaries of global fragmentation, including defense contractors and energy names. Defense means adding portfolio diversifiers beyond fixed income, such as gold and infrastructure, that hold up when volatility spikes.
Key factors that will determine how this plays out:
- Duration of the Strait of Hormuz disruption: A closure measured in days looks very different from one measured in weeks or months.
- Saudi Arabia’s willingness and speed to ramp spare capacity to offset Iranian supply losses: JPMorgan estimates this could cap the oil shock at manageable levels.
- Federal Reserve response: If oil-driven inflation forces the Fed to hold rates higher for longer, the equity bull case weakens considerably.
- Diplomatic backchannels: Early reports of ceasefire negotiations triggered a brief relief rally, suggesting markets are watching closely for any de-escalation signals.
The bottom line from JPMorgan is straightforward. War is terrifying. It is also, historically, not a reason to abandon equities. The bank’s data show that investors who sold during past conflicts often locked in losses they did not need to take.
That said, this conflict carries genuine tail risks that earlier ones did not. The Strait of Hormuz is not Ukraine. An extended closure would hit global energy supplies in a way that few modern shocks have.
JPMorgan is not dismissing that. It is saying watch the fundamentals, not the headlines, and position accordingly.
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