Missiles, Money, and Markets: How Global Conflict Impacts Your Investments

This Week: Israel and Iran Trade Attacks

I know we usually save the news for our end-of-week market update, but this one couldn't wait. On June 12th, Israel launched a big attack on military bases in Iran. Iran fired back with missiles and drones, and explosions hit major cities like Tel Aviv and Tehran. It wasn’t just bad for the people in those countries, it also shook up the world’s money.

In just a few hours:

• Oil prices shot up

• Stock markets dropped

• Gold prices hit a record high

So… what does war have to do with money? Why did money move so quickly? And why should you care?

Let’s dig in.

Why War Makes Money Move

Imagine playing your favorite video game, and then suddenly—BOOM!—the rules change in the middle of your turn. That’s kind of what war does to the economy.

Let's say you're in the middle of a Monopoly game with your family. You just passed GO and now you're ready to make some investments. You pick up your bright red hotels, eager to place them on Boardwalk and Park Place, when suddenly... the rules completely change.

Now, rent values are flipped, some properties can’t be bought, and your stack of cash isn’t worth what it was a turn ago. Confusing, right?

Hotels may no longer seem like the best move in the game. Maybe the safest move is to sell your houses until you have a better sense of what the rules are.

That's kind of how investors feel. When fighting starts, investors get nervous.

They worry:

• Will gas get more expensive?

• Will stores have to close or raise prices?

• Will businesses stop shipping products?

• That nervous feeling causes money to move in big ways.

All of this serves as a reminder: markets DO NOT like surprises (especially ones with missiles and explosions)

Analyzing Trends

"Why'd the Price of Oil Shoot Up?"

Israel and Iran are close to the Strait of Hormuz (a narrow water passage where 1 out of every 5 barrels of oil travels). If you live in Atlanta, think of it like the I-75 & I-85 connector. If you're not familiar with that, just think of it like a super busy oil highway for the world.

If fighting blocks that route, it becomes harder to get oil. And when oil is harder to get, it costs more.

This week, oil prices jumped by nearly 7% in one day. That means more expensive gas, plane tickets, and even products shipped by trucks.

We saw a somewhat similar situation a few years ago when fighting broke out in Eastern Europe. When Russia invaded Ukraine, oil prices rose. That’s because Russia is one of the world’s biggest oil suppliers. When the war started, a combination of sanctions (rules that limit buying and selling) and dangerous conditions from the fighting made it harder to move oil around. So, there was less oil available (supply), but people still needed the same amount (demand), which is a recipe for rising prices.

"Where did the money go?"

The money didn't just disappear. For the most part, it was moved.

During a crisis, people tend to:

• Sell riskier things like tech stocks

• Buy safer things like gold or government bonds

This week, gold reached its highest price ever. That was because investors wanted something stable while the world felt unstable.

This Has Happened Before

Let's take a trip through history and learn about other moments when war shook the market:

World War II (1939–1945)

At first, stocks dropped. But once the U.S. got involved and built tanks and planes, the economy actually grew, and jobs increased.

Vietnam War (1955–1975)

The U.S. spent a lot on the war, which made prices go up. This hurt savings and slowed the market.

Gulf War (1990–1991)

Oil prices went up fast when Iraq invaded Kuwait, but they went back down once the war ended quickly.

Russia-Ukraine War (2022–Now)

As I mentioned earlier, this war messed up food and energy supplies, making gas and groceries more expensive across the world.

What to Remember

Even if a war happens far away, it can change things right where you live. That might mean gas prices or even how much cereal costs at the store.

When there’s conflict, remember these 3 typical trends:

• Gas usually goes up

• Markets go down (for a bit)

• Gold and safe investments go up

Also, don't forget, when you zoom out, the market always bounces back once things settle down. Don't get too nervous, and always remember you're investing for the long term.

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We’ll be back later with our full market update, but we wanted to get this one out early because it’s big, and you deserve to understand it.