How Trading On War News Could Torpedo Your Portfolio

Headline risk is back on Wall Street as the U.S.-Iran war drags on.

It’s hard for investors to ignore the drumbeat of negative news: Oil prices top $100 a barrel. Shipping disruption in the Strait of Hormuz puts global economy at risk. Stocks sink as inflation fears resurface.

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But investors shouldn’t make the mistake of trading on breaking news from the battlefield.

Keep Your Politics And Portfolio Apart During War With Iran

Trading on war headlines and geopolitical news could torpedo your portfolio, history shows. The market’s initial dive due to geopolitical shocks tends to be short-lived. And, unless a recession ensues and takes a big bite out of corporate profits, markets tend to bounce back quickly, an analysis by LPL Financial shows.

The S&P 500 historically has experienced pullbacks of only about 4.5% after geopolitical events going back to World War II, according to LPL Financial. And markets typically stabilize in less than a month after the initial shock wears off — if the economic damage is contained.

That’s in line with the latest dip due to Iran uncertainty. The S&P 500 was down 5% at its low since its January high — and down roughly 3.6% since the U.S. attack on Iran at the end of February. That’s normal market action, says Jeff Buchbinder, LPL’s chief equity strategist.

On average, the market suffers pullbacks of 5% to 9.99% three times a year, says Buchbinder. And corrections, or declines of 10% to 19.99%, happen about once a year.

“Keep those statistics in mind,” said Buchbinder. “Ignore the noise or the temptation to sell because selling (due to fear of) headlines is often the worst time to sell.”

Volatility Is Part Of Investing

What you don’t want to do is view military conflict as the end of the world. Sure, there’s a risk that America’s fighting will be more protracted than feared and cause oil to spike higher and cause a recession. But if the historical playbook plays out and we don’t get a recession, the current market scare could be in the rearview mirror soon.

“Volatility is normal,” said Buchbinder. “It’s like a toll that you pay on the road to attractive long-term returns.”

Fear is the enemy of investors. But if your portfolio is well-diversified and constructed in a way that allows you to pay the bills and live a normal life despite paper losses, there’s not much you should really do except, perhaps, don’t obsess over headlines that impact your money.

“We wouldn’t be following the news and reacting with fear,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management.

What Zaccarelli prefers investors to do instead is play a little offense instead of taking a defensive approach to markets.

“We prefer to wait for opportunities to present themselves rather than de-risk or do something in reaction to what’s happening in the market,” said Zaccarelli.

How To Withdraw Money In A Volatile Market

But if your portfolio and finances aren’t set up properly for a downturn, there may be harder decisions you need to make, says Zaccarelli.

Let’s say, for example, that you have little savings to ride out a storm and you must pull from accounts that have been impacted by market fluctuations. Instead of selling off stocks, Zaccarelli recommends taking distributions from less volatile parts of your portfolio, such as high-quality fixed-income assets like U.S. Treasurys and investment-grade corporate bonds.

“That’s one source of liquidity where you can take withdrawals from your portfolio without doing long-term damage,” said Zaccarelli.

If you have assets that have held up well or are down only a few percentage points, those are candidates to sell if you must sell, he says.

What you don’t want to do is sell a high-quality company whose shares are down 20% to 30%, he adds.

“It’s your risk assets, your equities, your higher-performing investments that are going to be the most important to you over the long periods of time,” said Zaccarelli. “Once you sell those shares, you (may) never get them back (at the same prices) and you don’t get the chance to double or triple or quadruple your money over time.”

Just make sure that the reason you are selling in a volatile market driven by headlines is that you are selling for a need, such as to raise capital. You don’t want to make moves because you’re scared by what you see on the evening news or read in the newspaper.

War With Iran: Prepare For Bumpy Markets

It’s easier to ride out volatility if you’re prepared for it. That means having some diversifiers in the portfolio, such as gold and other assets that don’t move in tandem with stocks, says Ryan Detrick, chief market strategist at Carson Group, an investment advisory firm.

Currently, the Carson Group doesn’t see a recession on the horizon, says Detrick. “But if oil were to spike to $200 a barrel, we have a very different conversation,” said Detrick.

Bailing out of the market now means you’re betting on the worst outcome. You could just as easily see more bullish headlines, such as the Strait of Hormuz reopening completely or the U.S. and Iran hammering out a deal to end the war.

There’s also a chance that the market could succumb to a correction, or a drop of 10% or more, says Detrick, but that’s not a reason to tear up your financial plan.

“When in doubt, diversify (the risk) out,” said Detrick. “Every year has bad headlines. Every year has volatility. We’re not minimizing those headlines, but we are saying don’t panic.”

Panic Is Costly During War With Iran

Detrick says investors who panicked in April 2025 when President Trump rolled out his tariff plan and stocks fell nearly 20% likely missed out on a chunk of the rebound,

But if you need to raise money now and you’re worried a bigger downdraft is coming, there’s no rule that says you can’t take money off the table, says Detrick.

For investors more actively looking to manage risk and boost the resilience of their portfolios, allocating money to gold and other alternative investments can function as a hedge, says Ulrike Hoffmann-Burchardi, chief investment officer (Americas) and global head of equities at UBS.

But bailing out of the market and trying to time the market can be costly, Hoffmann-Burchardi warns. Let’s say you bail out of the market and don’t get back in and you miss upside. You’ll cost yourself a bundle. A $100 investment in the S&P 500 in September 1989 would have grown to $3,617 by the end of January 2026, says Hoffman-Burchardi. But being out of the market and missing the best quarter would have resulted in only an increase from $100 to $2,863 over that extended period. “Over 20% less,” said Hoffmann-Burchardi.

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