7 things to know about the evolving conflict with Iran

A feature article from our U.S. partners

Investor uncertainty increased in the days following the U.S. and Israeli military campaign against Iran, which began on February 28. 

A key factor remains the expected duration of the conflict. Market behavior suggests investors are pricing in a potentially more prolonged period of uncertainty.

In a recent discussion, Fidelity’s Jacob Weinstein, Senior Vice President of Fidelity’s Asset Allocation Research Team (AART), pointed to seven things to keep in mind as the scenario in Iran unfolds—and the potential impacts on the investment landscape.

1. We’re in a world of heightened geopolitical risk.

It’s unclear how the conflict might eventually involve other major military and economic powers regionally and globally, especially if—as conventional thinking holds—Iran aims to prolong the duration of the fighting. For the moment, China—a close economic and security partner of Iran—and other major world players seem to be taking a wait-and-see approach. What does seem likely, Weinstein says, is that unexpected geopolitical events are more likely in the current environment. 

2. Higher energy prices could have follow-on impacts.

Fluctuating energy prices could impact consumer confidence and spending—especially if the conflict proves lengthy. However, oil has less sway on consumer spending than in the past. As of early 2026, energy spending comprises around 3% of a typical U.S. consumer’s basket of goods consumption, down from a peak of more than 10% in the early 1970s.

So far, energy prices have not risen enough to tilt the economy into a recession, Weinstein believes. Businesses may have to pay higher input prices for energy. That could get passed along to consumers. It’s something to watch, but Weinstein says it’s not yet a significant economic threat. 

3. This is not Venezuela.

Unlike Venezuela, Iran is a regional power, a bigger economy, a major energy producer, and a country with a significant military force. It also has proxy forces, including Hezbollah and the Houthis, on its side.

Therefore, Weinstein sees a wide range of possible outcomes and risks, potentially over a longer period.

4. Keep an eye on inflation—and growth.

A prolonged conflict could keep energy prices higher for longer, putting more upward pressure on inflation. If rates continue to move higher as a result, Weinstein says he’ll be watching the reaction of the U.S. Federal Reserve. One potentially contrarian development to watch: If the Fed and other central banks were to become more concerned about the impact of the conflict on economic growth vs. inflation, it could increase the potential for monetary accommodation.

5. The business cycle stays the same—for now.

Nothing has changed in terms of the U.S. business cycle, which remains in the mid-cycle phase, according to AART’s research. As of early March, Weinstein sees a low recession risk and believes it would take a more significant shock to oil markets to change the current expansionary state of the business cycle. This is not something the Asset Allocation Research team anticipates as its base case.

6. Focus on fundamentals.

Geopolitical risks have increased. Yet Weinstein notes this has happened amid a strong overall trend for corporate earnings, which has moved beyond large cap growth companies to include value stocks, small caps, and other asset classes—a so-called broadening trade.

7. Think diversification.

Weinstein notes that for longer-term investors, lower prices equal more attractive entry points. This could open opportunities for dip-buying and diversification from U.S. equities. AART also has been encouraging clients to think about hedging in a new era of geopolitical risk. Considerations include diversification into commodities and precious metals.