Did the War Actually Move Markets? Testing the US-Iran Conflict With 28 Assets

The US-Iran war is winding down. A peace deal is being finalized this week, the Strait of Hormuz is preparing to reopen, and oil dropped 4.5% on the news. The conflict that began on February 28 with US-Israeli strikes has lasted almost four months.

I have been tracking 28 financial assets through this conflict on a live dashboard. Now that the arc is complete, this piece asks the harder question: did the war actually drive the market moves we saw, or were markets just doing what markets do?

The short answer: yes, the war drove them. In the right direction, in the right order, affecting the right assets. But only for about two weeks. After that, the war's fingerprint disappeared from the data.

How the test works

Saying "oil went up during the war" is not evidence the war caused it. Oil could have gone up for other reasons. To isolate the war's effect, I needed a model of what each asset would have done without the war.

For each of the 28 assets, I estimated a baseline using 137 trading days of pre-war data (August 12, 2025 through February 27, 2026). The model is simple: how much does this asset normally move when the global stock market (ACWI) moves? That gives each asset its "normal" relationship to the broader market.

During the war, I measured how far each asset deviated from that baseline. The deviation is the war's candidate fingerprint. Not what went up or down, but how much each asset moved away from what it would have done in a normal period.

The predictions

Before looking at results, I scored each asset on a scale from -2 (strong loser) to +2 (strong winner) based on the economic logic of an oil-driven Middle East conflict. The scores are hand-assigned, which is the most judgmental input in the entire analysis. Here is the logic:

+2 (should gain the most): Oil, Brent, energy sector, oil majors (Exxon, Chevron), Saudi Arabia, defense stocks (Lockheed, RTX, ITA), gold. These either benefit directly from higher oil prices or from increased military spending.

+1 (mild winner): Natural gas, US dollar. Indirect beneficiaries.

0 (neutral): S&P 500, Japan, China, tech, financials, healthcare. No clear directional thesis from the war specifically.

-1 (mild loser): Europe, Turkey, emerging markets, consumer discretionary, Treasuries. Energy importers, risk-off candidates, or oil-price-sensitive.

-2 (should lose the most): Airlines. Fuel is 20-30% of operating costs. An oil spike crushes margins directly.

The staircase

Here is the result. Each bar is one asset, sorted left to right by predicted exposure (-2 on the left, +2 on the right). The bar height is the actual abnormal return during the first week of the war. If the war drove markets as predicted, the bars should climb from negative on the left to positive on the right.

They do.

Airlines sit firmly in the red on the left. Oil, the rightmost bars, are up the most. The bars climb from left to right in roughly the order predicted. The rank correlation between predicted exposure and actual abnormal return is +0.64 across the 26 scored assets (28 tracked overall, with VIX and the placebos sitting outside the correlation). That is not a perfect match, but it is a strong ordering. Random market noise does not sort assets by their war exposure like this.

Two predicted winners came up red: gold and Exxon. Gold was scored +2 (should rally as a fear trade) but fell 1.2% in the first week. Exxon was scored +2 (oil major, should benefit from price spike) but fell 1.5%. These mismatches are shown in the chart. They are part of why the correlation is 0.64, not 1.0.

The control group

If the war drove the results, then assets with no war exposure should show no abnormal move. Four assets were scored at zero exposure and set aside as controls: utilities (XLU), consumer staples (XLP), US REITs (VNQ), and small-cap US (IWM).

Three of four were clean. Utilities moved -1.2% (not significant). REITs moved -0.8% (not significant). Small-cap moved +1.3% (not significant). None deviated meaningfully from their baselines.

Consumer staples was the exception: -5.5%, statistically significant. The most likely explanation is defensive-sector money rotating into energy as the war began, which is arguably a mild war effect rather than pure noise. I scored it zero, so I count it against myself. The control check reads 3 of 4 clean.

The decay

If the war's effect were permanent, the staircase pattern should hold regardless of how wide the measurement window is. It does not. The pattern is strongest in the first week and fades steadily.

The correlation peaks at 0.64 around day 7. It holds above 0.5 through day 15. Between day 15 and day 20, it collapses from 0.58 to 0.23. By day 40 it is essentially zero (-0.01).

This is the shape of a real but short-lived shock. The war genuinely reshaped the ordering of markets for about two weeks. Then the assets that had been pushed off their normal behavior returned to it. The war was still going. The ceasefire had not been signed. But the market had already processed the information and moved on.

Oil in three acts

Oil's abnormal return tells the full story of the war in one chart.

Act 1: The surge. Oil's abnormal return climbed from +6% at the start of the war to ~56% at its peak on April 7, the day before the ceasefire. The market priced in a genuine supply threat through the Strait of Hormuz.

Act 2: Fear leaves. When the ceasefire was announced on April 8, oil gapped down and fell to +28% by April 19. That drop, roughly half the peak, was the fear premium leaving. The market was saying: the immediate risk of total supply disruption is lower now.

Act 3: Supply premium holds, then unwinds. After the ceasefire, oil's abnormal return stabilized between +30% and +50%, spiking again when strikes resumed in May. The Strait was still closed. The supply threat was real, even if the worst-case scenario had receded. This week, with a peace deal being finalized and the Strait preparing to reopen, oil has dropped to +20.5% abnormal. The last piece is unwinding.

The three-act structure is what you would expect from a real supply shock that transitions from panic to negotiation to resolution. The fear left in Act 2. The structural premium held through Act 3 because the physical chokepoint remained closed. Now it is being released.

A second method

As an independent check, I measured oil's instantaneous jump on the day the war began using a completely different technique: regression discontinuity in time. I fit separate trend lines to oil's daily returns in a 10-day window on either side of February 28 and measured the gap at the cutoff.

The gap: +11.4%. Oil's return on the war day jumped roughly 11 percentage points above where the pre-war trend was heading.

Honest caveat: the t-statistic is 1.54 (roughly p = 0.13), which is suggestive but not conclusive on its own. A 10-day window gives few data points to work with. The value of this check is not that it proves anything independently. It is that a completely different method, using no market-model baseline and no window-summing, agrees in direction and approximate size with the staircase. Two methods converging is more trustworthy than either alone.

What this means

The war's impact on markets was real, ordered, and short. The staircase shows it was real: the right assets moved, in the right direction, in the right order. The control group shows it was specific: unrelated assets did not move. The decay curve shows it was short: two weeks of genuine reshaping, then the market moved on.

The almost-four-month gap between the war's market impact fading and the diplomats signing a deal is the finding worth sitting with. Markets process geopolitical shocks fast. The pattern peaked within a week and was gone within six weeks. The conflict was still active. Strikes resumed after the ceasefire. But by the time the market's assessment of "how does this war change the ordering of assets?" had faded to zero, the answer was: it doesn't, not permanently.

Oil is the partial exception. Its abnormal return never went to zero because the Strait of Hormuz stayed physically closed. That is a real supply constraint, not a sentiment. It is now being released.

For anyone who repositioned a portfolio based on the war and held that position past the first two weeks, the data says the trade was already over. The staircase had flattened. The assets the war had pushed off normal were returning to normal. The only thing still being repriced was oil, and only because the physical infrastructure was still disrupted.

Markets price geopolitical shocks faster than the headlines suggest and much faster than the diplomats move.

Honest limitations

This analysis has real limitations, and they are worth naming.

The exposure scores are hand-assigned. A different analyst could reasonably score some assets differently. The staircase is only as good as the scoring.

The baseline model is a single factor (global equities), with no outlier treatment. A richer model with sector, oil, or Fama-French factors would strip more normal variance and produce cleaner abnormal returns. The trade-off is interpretability: the simple model is easy to explain and audit.

All assets are US-listed proxies, so foreign markets show up with a slight lag. Commodities and the VIX fit the baseline poorly (low R-squared), which makes their abnormal returns the noisiest of the 28.

Some assets in the staircase are near-duplicates. Oil and Brent are highly correlated. Lockheed, RTX, and the defense ETF move together. Treating them as independent data points overstates the effective sample size. The +0.64 correlation is better read as "a clear ordering" than as "26 independent confirmations."

Individual t-statistics are approximate and do not correct for event-window volatility inflation or cross-asset correlation. The staircase pattern and the decay curve are more reliable than any single asset's significance.

The data updates daily. The numbers in this piece are as of June 18, 2026. The live dashboard reflects the latest data.

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This piece accompanies the Ripple Effect dashboard, which tracks 28 financial assets through the US-Iran conflict in real time. The statistical verdict page is here.