Will the Trump Bull Market Come to an Abrupt End Due to the Iran War? History Offers Its Objective and Potentially Uncomfortable Take.

Based solely on return data, Wall Street has excelled under President Donald Trump. During his first term (Jan. 20, 2017 – Jan. 20, 2021), the ageless Dow Jones Industrial Average (DJINDICES: ^DJI), benchmark S&P 500 (SNPINDEX: ^GSPC), and growth stock-dominated Nasdaq Composite (NASDAQINDEX: ^IXIC) gained 57%, 70%, and 142%, respectively.

This Trump bull market rally has continued into his second, non-consecutive term, with the Dow, S&P 500, and Nasdaq Composite rallying 10%, 13%, and 16%, respectively, through the closing bell on March 9, 2026.

President Trump delivering remarks. Image source: Official White House Photo by Shealah Craighead, courtesy of the National Archives.

While some of the factors fueling this rally have little to do with President Trump, such as the artificial intelligence revolution and the advent of quantum computing, other variables, such as the flagship tax and spending law from his first term, the Tax Cuts and Jobs Act (TCJA), have played a tangible role in lifting equity markets. The TCJA permanently lowered the peak marginal corporate income tax rate from 35% to 21%, thereby allowing businesses to retain more of their earnings. S&P 500 companies have responded with record share buybacks.

However, the stock market isn't without its fair share of headwinds. Perhaps no catalyst stands readier to end the Trump bull market than the Iran war. According to nearly nine decades of history, which cuts through investors' emotions and provides an objective outlook for equities, the Trump-led Iran war presents a mixed bag for Wall Street.

Energy supply chain disruptions are the common denominator for stock market corrections

On Feb. 28, U.S. armed forces, at Trump's command, and Israel, jointly began attacks against Iran, which are ongoing as of this writing on March 9.

Arguably, the biggest concern with the Iran war is what it might mean for the global energy supply chain. Following the start of military actions, Iran virtually closed the Strait of Hormuz to oil exports. According to the U.S. Energy Information Administration, approximately 20% of the world's daily liquid petroleum travels through the Strait of Hormuz. If this conflict continues for several more weeks, if not months, we would be looking at the largest energy supply chain disruption in history.

Crude oil hits a high of $111.24 (+22.3%) after its reopen, before trimming gains to be trading 19.12% higher at $108.70. pic.twitter.com/Czqxa34CG1

-- Tony Sycamore_IG (@Tony_Sycamore) March 8, 2026

The response in crude oil futures markets has been swift. Between Feb. 27 and March 9, West Texas Intermediate crude oil skyrocketed from $67/barrel to as high as $119/barrel on an intra-day basis. It's the fastest advance we've observed in oil prices in more than four decades.

Higher oil prices pose a host of problems that go well beyond the per-gallon price at the gas pump. History tells us that rapidly rising oil prices typically correlate with weaker consumer spending, higher unemployment, and a potentially significant uptick in the inflation rate. These are some of the hallmarks of stagflation, which is a nightmare scenario for the Federal Reserve.

Equally important, a higher inflation rate would likely stamp out any talk of the nation's central bank further lowering interest rates. Investors have been expecting a handful of rate cuts this year as a catalyst for an expensive stock market.

Historical precedent shows that energy supply disruptions are the common denominator of stock market corrections and even brief crashes. The S&P 500 tumbled 44% over 11.5 months in the wake of the five-month oil embargo by the Arab nations of OPEC, which began in October 1973. We also observed a 13% decline in the benchmark index over three weeks following Iraq's invasion of Kuwait in August 1990.

Based on history, the Iran war does have the intangibles to bring the Trump bull market to an abrupt end. But there are two sides to this coin.

Image source: Getty Images.

Major geopolitical events are rarely a long-term tipping point for the U.S. economy or stock market

On the one hand, geopolitical events are known to heighten near-term volatility for the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite and increase uncertainty.

But the outlook for equities changes dramatically when investors step back and widen their lens. While geopolitical events that involve energy supply disruptions are often bad news for the stock market, most major geopolitical events are much ado about nothing from a long-term investment standpoint.

On Feb. 28, the day conflict began in the Middle East, Carson Group's Chief Market Strategist, Ryan Detrick, published a data set on X (formerly Twitter) that examined the performance of the S&P 500 in the wake of more than 40 major geopolitical events since the start of 1940.

Here's a list of major geopolitical events since WWII.

Up a median of 5% six months later. All of them felt really bad at the time. pic.twitter.com/Jb3QXL0L05

-- Ryan Detrick, CMT (@RyanDetrick) February 28, 2026

While Detrick's data set confirms that most events involving energy supply disruptions marked rough patches for Wall Street, the S&P 500 was higher 65% of the time one year later across all events. Although the average annual return of 3% following these major events is considerably below the long-term annualized return of the S&P 500, it nevertheless points to geopolitical events being more noise than an actual fundamental problem.

Detrick's data set also brings to light the nonlinearity of stock market cycles.

Although downturns are inevitable and often unpredictable, historical data shows they don't last very long. According to the analysts at Bespoke Investment Group, the typical S&P 500 bear market between the start of the Great Depression (September 1929) and the present day has endured just 286 calendar days, or roughly 9.5 months.

At the other end of the spectrum, Bespoke notes the average S&P 500 bull market has lasted 1,011 calendar days, or approximately 3.5 times longer than the typical bear market.

While periods of heightened volatility and brief elevator-down moves in the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite can tug on investors' heartstrings, nearly a century of history cuts through these emotions and shows how valuable perspective and patience can be.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.