The Iran war has roiled markets and sent oil prices surging. But these are the reasons why advisors shouldn't be spooked

The escalating Iran war sent oil prices soaring Monday as the conflict thrust the Strait of Hormuz, a vital conduit for global shipping and the oil industry, into the spotlight. However, advisors, should not be spooked by the disruption caused by the widening war.

"The most likely outcomes are manageable," said Adrian Helfert, chief investment officer of multi-asset strategies at Westwood, in a statement. "We assign roughly 45 percent probability to scenarios where this conflict is resolved within weeks and markets recover relatively quickly," he added. The tail risks are real, but they are not the central case."

Helfert, who is also the portfolio manager of the Enhanced Income Opportunity ETF, notes that, while energy supply is the key variable amid fears about the Strait of Hormuz, there could be a contained outcome. "The heavy U.S. naval presence in the region and OPEC’s preparations to increase emergency supply both work to limit the disruption," he said.

Brent crude futures (BZ=F) surged above $80 a barrel early Monday, with Trading Economics noting that the benchmark’s 13-percent spike was its highest since January 2025. Trading Economics notes that the conflict has prompted shipping companies to start rerouting their vessels away from the Strait of Hormuz, an important chokepoint that handles about one one-fifth of global oil shipments, as well as significant volumes of natural gas. Reuters reports that several vessels have already been damaged in the Gulf as the war spreads across the region.

Prices of U.S. West Texas Intermediate have also surged as a result of the war.

“U.S.-led strikes in Iran have pushed oil prices higher and reignited geopolitical risk,” said Adam Hetts, global head of multi-asset at Janus Henderson, in a statement. However, Janus Henderson thinks that markets are pricing a limited conflict, with broader investment implications still manageable unless escalation proves prolonged. “As always, diversification and a long‑term perspective matter most when uncertainty peaks,” he added.

Hetts says that, if oil prices hit $90, it would be consistent with the April 2024 conflict between Israel and Iran, when global markets were able to largely shrug off the price rises as the conflicts were resolved in “relatively short order.” He also notes that, as a rough proxy for a major conflict, the Russian invasion of Ukraine in early 2022 brought oil prices above $100 for a prolonged period with brief peaks above $120. “Oil prices as they stand are pricing in a limited conflict of relatively short duration,” Hetts added.

The conflict also weighed on stock futures Monday, with S&P 500 contracts down 0.3 percent and the Dow Jones Industrial Average Futures also shedding 0.3 percent. 

Specific sectors are also in the spotlight following the events in the Middle East. David Nicholas, president and founder of Nicholas Wealth Mangement and CEO of XFUNDS told InvestmentNews that the Iran conflict also changes the demand equation for defense contractors. “This isn’t a one-time demand bump,” he said, pointing to the conflict in Iran and the ongoing war between Russia and Ukraine. “The risk premium for NATO keeps increasing … NATO will look to increase munitions and equipment and overall military spend.”

Defense stocks are climbing Monday, with both RTX Corporation (RTX) and Lockheed Martin Corporation (LMT) up more than 3 percent. Shares of Northrop Grumman Corporation (NOC) are up more than 4 percent, compared with the S&P 500 Index’s (SPX) decline of 0.5 percent.

Nicholas noted that U.S. equity markets have little exposure to the Iran conflict. "The main driver of risk is oil prices which impact transport costs domestically and influence consumer spending," he added. "Markets will want to see de-escalation and for oil prices to retreat to not risk inflation rearing its head."

Darrell Cronk, chief investment officer for Wealth & Investment Management at Wells Fargo says that geopolitical risk premia across markets had already risen in recent weeks amid a well signaled military buildup, and notes that oil prices are up 20 percent year to date and at five-month highs. “Markets had largely anticipated the escalation and are therefore unlikely to be taken by complete surprise,” he said, in a statement. “At the headline equity level, little risk appears to be priced in, with most non-US indices trading near their highs, markets will likely trade defensively in the near term until the end game becomes clearer.”

However, there are additional key market transmission channels to monitor if uncertainty persists, according to Janus Henderson's Hetts. “Broader uncertainty suppresses investor sentiment, which can broadly weigh on risk-assets globally,” he wrote, in the statement. “This would likely make global developed market sovereigns, including U.S. Treasuries, and safe-haven currencies more attractive. In a prolonged period of uncertainty, increases in oil prices could generate a global inflationary scare, which in turn may reduce the likelihood of interest rate cuts by the U.S. Federal Reserve, currently expected for later this year.”

Last week the latest inflation data came in higher than expected, prompting talk that the Federal Reserve may continue its patient stance with regard to rate cuts.

The Federal Reserve has come under pressure from President Donald Trump to lower rates, but, in January, kept its policy rate steady at 3.5 percent to 3.75 percent.