Assessing if the Iran War Still Threatens Stocks

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.