Managing your money when geopolitical risk and volatility are high

It’s hard not to be worried by the avalanche of upsetting news stemming from the decision of the US and Israel to launch a war on Iran.

Nor about how that decision will affect the world’s economies and markets for months, if not years to come.

No one can reliably predict how this current moment in history will end. But short-term financial effects in the United States will be felt – at least initially – through higher market volatility and higher gas prices. And, depending on how long it lasts, the turmoil raises the risk of creating higher consumer prices, greater inflation and a recession.

But when it comes to making decisions about your finances going forward:

“For investors, my advice is not to overreact to the news of the day,” said chartered financial analyst Adam Grossman, founder of Mayport Wealth Management, in an email to CNN. Why? “Because we can look back at history and see that we’ve gotten through all past crises, and the market has recovered.”

Take even the most recent historical events. In 2022, Russia invaded Ukraine. Or the spring of 2025, when President Donald Trump launched his “Liberation Day” tariffs on friend and foe alike. Such events hurt both stocks and bonds in the short term. But they recovered relatively quickly, and in the case of stock indexes, went on to hit record highs … multiple times.

So, anyone who maintained a diversified portfolio during those periods may have seen some worrying drops in their holdings in the short run, but benefited soon after.

Similarly, over time, markets have recovered from past wars, recessions and pandemics, even though the bounceback wasn’t always so rapid.

Angelo Kourkafas, senior global investment strategist at Edward Jones, looked at how someone with $100,000 invested in the S&P 500 fared over time after major geopolitical events (eg, 9/11, the Iraq war, etc.). He compared two scenarios going as far back as 1990 in which the person 1) stayed fully invested in the S&P vs. 2) cashed out after a market-upsetting event for just six months before re-investing. “Consistently, that fully invested portfolio has outperformed,” Kourkafas said.

Put differently, “Most people who try to time the market are unsuccessful at that,” said Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth.

If the fear and stress created over the past two weeks is top of mind for you, you’re not alone.

But when it comes to your longer-term investments, it’s better to keep a broader perspective.

“Right now, the tangible result of the war is higher oil prices, which is like a tax on consumers. But that effect (which has an indeterminate timeframe) needs to be weighed against other factors,” Grossman said. For instance, he noted, “Immigration controls could lead to higher wages, which could lead to inflation and maybe (put) pressure on corporate profits. AI could boost productivity. Or it might cause widespread unemployment.”

Or … or … or … (fill in the blank).

The point is, “investors should be careful to not focus too narrowly on any one news item because it’s always going to be just one of many factors, and it’s very difficult to know how those factors will all net out, and when,” he said.

Assuming your long-term savings are broadly diversified across stocks and bonds through low-cost index funds, target-date funds or actively managed mutual funds – and your asset allocation of stocks to bonds is fitting for your age – you might consider sitting tight.

“What we say to investors is, ‘Don’t play geopolitics with your portfolio.’ We know that can have a real cost in terms of long-term returns,” Kourkafas said. “Sometimes the best move is no move at all.”

If you’re in your 20s and 30s and have a high allocation to stocks – eg, 80% to 90% – you’ll see more volatility than investors with more conservative portfolios. “That’s okay. That’s what is required to make a higher return, longer term,” Pappalardo said.

If you’re within a decade of retiring – or in retirement – you should already have a more conservative allocation toward fixed income (e.g., Treasuries and top-quality corporate bonds). But within that fixed income part of your 401(k) or IRA portfolio, he recommends that up to a fifth of it (5% to 20% of that bucket) be in cash and cash-like instruments such as certificates of deposit and money market funds.

Speaking of cash, if you have reason to believe you are at real risk of losing your job and you don’t have sufficient emergency funds (e.g., at least three months but preferably six months of living expenses), temporarily prioritize building those savings over making retirement contributions, he suggested. And invest that money in high-yield, interest- bearing accounts.

An upside for anyone investing in Treasury bonds inside or outside of a 401(k) is that yields have risen in the wake of the Iran attack, so what you buy now will generate more interest over time than what you’re currently getting.

And if you’re fortunate enough to have excess cash to invest in stocks and bonds, prices for which have fallen, Pappalardo said, “look at financial market disruptions as a time to buy more.”