Assessing if the Iran War Still Threatens Stocks
Ken Fisher argues that a resurgence of the Iran conflict is unlikely to trigger a global bear market, as long as it remains a regional war. He cites historical precedent showing regional wars have never caused bear markets, and explains that oil supply workarounds are already offsetting the impact of Strait of Hormuz disruptions. The bull market, he concludes, can persist despite ongoing tensions.
Summary
Ken Fisher opens by addressing a common investor concern: whether an escalation of the Iran conflict would seriously threaten the ongoing global bull market. His core argument is that if the conflict remains regional — involving the US, Israel, and perhaps a few Western-allied Gulf nations against Iran — it almost certainly would not derail the bull market. He points out that this scenario has been long anticipated by markets and therefore would not constitute a shock.
Fisher draws on a broad historical pattern: regional wars, regardless of how many there have been throughout history, have never caused bear markets. Only world wars or conflicts drawing in major global powers have had that kind of market impact. He does acknowledge a more dangerous scenario — if the conflict expanded to include China, Pakistan, or other non-Western-aligned nations providing armament support to Iran — but considers that outcome unlikely, particularly noting Russia is already stretched thin in Ukraine.
He then outlines what he calls the 'methodical three steps' of an energy-centric war: first, pre-conflict tensions drive oil prices up through saber-rattling; second, the outbreak of fighting causes markets to rapidly price in worst-case outcomes; and third, markets gradually re-price toward more likely, less catastrophic outcomes, eventually recognizing the conflict as temporary with no lasting economic damage.
On the specific concern about the Strait of Hormuz being blocked, Fisher argues this is a burden but not an insurmountable one. He highlights that Saudi Arabia is now running 5 million barrels per day through its East-West Pipeline into the Red Sea, the UAE is increasing output that bypasses Hormuz, and global oil producers outside the region are ramping up production in response to higher prices — which will, through normal supply and demand dynamics, bring prices back down over time. He notes that global GDP has remained stable, and major global stock indexes have been hitting all-time highs in most major currencies. Fisher concludes that within 12 months, Gulf countries will become less dependent on the Strait of Hormuz, and that markets are already pre-pricing this diversification.
Key Insights
- Fisher argues that regional wars have never caused bear markets throughout history, and that only world wars or conflicts drawing in major global powers have had that level of market impact.
- Fisher identifies the one scenario that could threaten markets: if the Iran conflict expanded to include major antagonists like China providing armament support to Iran, turning it from a regional into a global conflict.
- Fisher describes a three-step price cycle for energy-centric wars: oil rises on pre-conflict tensions, markets rapidly price worst-case outcomes at the outbreak of fighting, and then gradually re-price toward more likely temporary outcomes.
- Fisher claims Saudi Arabia is now moving 5 million barrels per day through its East-West Pipeline bypassing the Strait of Hormuz, and that the UAE is also increasing output that does not flow through Hormuz — demonstrating that existing workarounds are already substantially offsetting the blockage.
- Fisher asserts that global GDP numbers have remained stable and major global stock indexes have been hitting all-time highs in most major currencies despite the conflict, as evidence that the Iran war has not created the economic damage investors feared.
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