When Geopolitical Risk Fades, the Data Takes Over

• The U.S. and Iran are said to have agreed on a peace deal.

• There have been similar situations in the modern era.

• The S&P 500 has tended to outperform over the following 24 months.

Moments like these are exactly when we must separate the signal from the noise…

Over the weekend, the U.S. and Iran appear to have reached an agreement to end hostilities in the Middle East. The White House says the deal is expected to be signed this Friday. Iran and Pakistan have both confirmed the breakthrough, though the full terms are still emerging. Early reports indicate the Strait of Hormuz will fully reopen to the normal flow of energy shipments, and the two countries will enter a 60‑day negotiation window over Iran’s nuclear program.

As the Energy Information Administration data shows, restoring regular oil transit through the Persian Gulf is a meaningful tailwind for the global economy. Asia consumes roughly 80% of those barrels. A normalization in supply reduces competition for alternative sources, eases pressure on global prices, and tempers headline inflation. That, in turn, improves the global growth outlook.

Back in early March, I parsed the historical market data around major Middle East conflicts. I measured each event from the start to the trough and then through the end. The pattern was remarkably consistent: the S&P 500 tends to fall about 5.7% before bottoming and then rally roughly 3.6% by the time the conflict concludes. This episode followed the same script.

Now, with the oil‑and‑inflation overhang finally lifting, the more important question becomes: what happens next? History suggests that when these conflicts end, the S&P 500 often finds its footing and grinds higher.

But don’t take my word for it, let’s look at what the data’s telling us…

When you zoom out across the modern era of the S&P 500, eight major Middle East conflicts stand out—from the Suez Crisis in 1956 to the strikes in Iran over the weekend. To understand how investors actually behaved during these shocks, I went back and examined each event through the same lens: duration, the number of days before the index hit its trough, the magnitude of that drawdown, and the S&P 500’s performance from the last close before the conflict to the day it effectively ended. The goal was simple… strip out the noise and see how markets responded when geopolitical stress was at its peak.

Across the full set of events, a clear pattern emerges. Markets typically sell off early, bottom quickly, and recover as uncertainty fades. Even in conflicts with sharp initial declines, like the First Gulf War or the early stages of the Iraq War, the S&P 500 ultimately finished the conflict window in positive territory. I focused the measurement window to the period Wall Street treated as the “active” phase of each conflict. On average, the trough came 23 days after the event began, with a modest –5.7% drawdown, and the index posted a 3.6% gain from start to finish. The takeaway is straightforward: markets tend to overreact first and recalibrate fast…

With the conflict now appearing to be over, I wanted to examine the next phase of the conversation: how the S&P 500 performs after the removal of a major overhang like constrained global oil supply. As noted earlier, increased energy flow helps pull down headline inflation, which reduces pressure on central banks to tighten policy and choke off demand.

But the oil landscape has changed dramatically since the 1950s, 60s, and 70s. Back then, the U.S. imported up to one‑third of its oil from the Middle East. Today, as the opening table showed, that figure is below 3%. So, I focused on the modern‑era conflicts from 1990, 2003, 2023, and 2025, and measured the S&P 500’s performance 3, 6, 12, and 24 months after each conflict ended…

These figures are price‑only, but the message is clear: the S&P 500 has historically performed well in the year following the end of similar conflicts. The average 12‑month return of 20.4% is more than double the index’s long‑term annualized total return (dividends reinvested) of 9.7% since 1928. The 24‑month result tells the same story.

At the end of the day, the market’s message is remarkably consistent. Geopolitical shocks in the Middle East hit fast, hit early, and then fade as investors regain visibility. Headlines amplify fear, but price action tells a different story, one grounded in decades of data, not 24‑hour news cycles.

And that’s the signal worth paying attention to: stay anchored in data, stay grounded in history, and let the noise pass. Because history overwhelmingly rewards patience over panic.

Five Stories Moving the Market:

The U.S. and Iran announced they have agreed on an interim peace deal, a potentially major breakthrough after nearly four months of fighting that created global political and economic turmoil – WSJ. (Why you should care – the deal should be a boost to global oil supply, weighing on prices and inflation growth)

U.S. President Donald Trump said that the agreement he reached with Iran would ultimately assure that the Strait of Hormuz is “permanently toll free”; Trump also insisted that if Iran failed to reach a final nuclear accord with the United States, he would restart military attacks on Tehran – NY Times. (Why you should care – UN law states that no one country can’t block or impede traffic through a strait)

Nations including the United ​Kingdom, France, Germany ‌and Italy said they were prepared ​to lift sanctions on ⁠Iran in ​response to steps ​on its nuclear program after the U.S. and ​Iran reached a ​deal to end their war – Reuters. (Why you should care – the deal to lift such sanctions would allow Iran to sell oil more freely on the open market, boosting global supply)

The Bank of Japan is widely expected to raise its benchmark interest rate to the highest level since 1995 at the first regular policy meeting ever held without the governor in attendance; policymakers to are expected to raise the benchmark rate by a quarter percentage point to 1% at the conclusion of the two-day meeting on Tuesday – Bloomberg. (Why you should care – the BOJ is expected to introduce a hawkish pause, meaning it’s still inclined to raise rates)

For more than a decade, Chairman Kevin Warsh has argued that the Federal Reserve should say less; how much a central bank reveals about its thinking shapes mortgage rates, markets, and the cost of borrowing for everyone – WSJ. (Why you should care – Wall Street will be closely parsing this week’s monetary policy announcement for clues about the central bank’s future direction)

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