What Prior Military Operations Say About Where Stock Market Is Headed

• After June 2024 strikes on Iran, the S&P 500 reversed to close up 1% the next day and found support at its 50-day moving average before continuing upward
• Historical precedent shows markets decline before expected wars but rally once hostilities start: the S&P rose 3.7% when Desert Storm began in 1991 and made a follow-through bottom right before the 2003 Iraq invasion
• Despite initial Monday losses from the latest Iran conflict, the Nasdaq gained 0.4% intraday while oil prices jumped 5% and the VIX fear gauge spiked, though such VIX spikes historically signal market bottoms

Market Summary: Historical Military Operations and Stock Market Response

Key Findings

Recent U.S. and Israeli military operations against Iran have historically produced muted market reactions, with investors quickly moving past geopolitical tensions. Following the June 23 assault on Iran's nuclear and military sites, the S&P 500 reversed higher and closed up 1%. Similarly, after the January capture of Venezuelan leader Nicolas Maduro, the S&P 500 gained 0.6% and the Nasdaq added 0.7%.

Historical Context

Historical data shows markets often decline ahead of expected conflicts but rebound once fighting begins:

• March 2003 (Iraq invasion): Nasdaq and S&P 500 made follow-through bottoming signals, leading to sustained gains
• January 1991 (Desert Storm): S&P 500 pulled back 7% before operations but rallied 3.7% when bombing started, ultimately gaining 15.7% over subsequent weeks
• October 2023 (Hamas attack): S&P 500 rose three consecutive days after market opened, despite being 6.5% below July peak

Current Market Conditions

As of Monday trading, the Nasdaq was up 0.4% and S&P 500 marginally higher, despite concerns about prolonged conflict. The VIX surged to its highest level since November 21, though such spikes often signal market bottoms. IBD's market exposure sits at 40%-60% as markets seek direction.

The aerospace and defense ETF (ITA) climbed nearly 3% to record highs, breaking above 246.22. Oil prices rose 5%, while gold reached near-record highs at $5,294.40 per ounce.

Analysts suggest reduced geopolitical risk and potential oil price declines could boost consumer spending and benefit global markets.