Here's the Iran-war playbook for investors as the conflict drags on

• The US-Iran war has jolted markets, with stocks falling and oil and bond yields rising.
• There are a few ways to steer through the volatility, market pros told Business Insider.
• Tips include avoiding the rush into "war stocks" and increasing cash allocation.

Don't panic.

That's the first rule investors should follow when considering how to invest when chaos strikes, and the Iran war is no different, market pros told Business Insider.

The conflict-fueled sell-off picked up again on Thursday as the war sent oil prices back to $100 a barrel. The S&P 500 is now down nearly 3% for the year. As of February, the index was on track for one of its worst year-to-date performances in decades.

Investors have been quick to sell the broader index and purchase volatility-linked ETFs, according to a report from VandaTrack Research, which tracks retail investor flows. But the most important thing for investors to do is not panic and make dramatic changes to their portfolios, strategists who spoke with Business Insider said.

Since World War II, markets have recovered their losses in the six months following the start of a war 72% of the time, according to Art Hogan, the chief market strategist at B. Riley Wealth Management.

"So making any drastic changes to your long-term investment portfolio is probably a mistake," he said.

Here are five things market pros think investors should be doing right now instead.

1. Don't rush into 'war stocks'

Some investors may feel the instinct to rush into areas of the market that could see a boost from the war, such as energy, aerospace, and defense. The problem with that strategy is that by the time most investors have caught on, the gains in those sectors have largely been priced in, meaning many traders risk losing money, Hogan said.

He pointed to how many investors piled into defense stocks at the start of the year when the US raided Venezuela, with the iShares US Aerospace & Defense ETF rising as much as 9% in the first two weeks of the year. The ETF, though, is now down 3% from its mid-January peak.

"Piling into some obvious winners likely can cost you money as well, so I wouldn't chase that," he said.

2. Don't load up on defensive investments

Other defensive areas of the market, such as industrials, consumer staples, and small-cap stocks, have been outperforming recently. While investors have typically sought out these areas for safety, they look expensive at the moment, Hogan said.

"You're looking at making an investment at or near all-time highs in both sectors, which will likely see a bit of a reversion to the mean or a pullback once things get rectified," he added.

Areas like small-caps have also been the most affected by the US-Iran turmoil, as higher inflation is likely to hit smaller companies the most, he said.

Peter Berezin, the chief global strategist at BCA Research, advised investors to be wary of areas of the market that could be impacted by inflation, such as bonds. While bonds are typically thought of as safe-havens, inflation can raise interest rates in the economy over the long run, which lifts bond yields and lowers prices.

"You have a stagflationary shock, so jumping into bonds can be a bit risky. Being in stocks can be a bit risky," he told Business Insider.

3. Consider beaten-down tech stocks

Tech is the one area of the S&P 500 that seems relatively immune to a potential oil-price shock and the possibility of higher inflation.

"We're not going to stop using our iPhones," B. Riley's Hogan said. "It's the last thing that we give up."

The sector is also trading at a discount after fears of an AI apocalypse ripped through software and other corners of the sector earlier in 2026.

"If you're underexposed to technology, now might be the time to rotate into that and perhaps out of some of the sectors that have done very well," he added.

4. Consider holding more cash on the sidelines

For short-term investors who insist on making changes to their portfolio, a good option is to keep extra cash on the sidelines rather than taking on more risk in other areas of the market, according to BCA's Berezin. He pointed to the potential for higher inflation and stagflation, a dreaded scenario in which inflation rises while growth slows.

"This wasn't an economy that was firing all cylinders even before the oil shock, and if the oil shock persists, that could be enough to drag it down into a recession later this year," Berezin said, advising investors to increase their allocation to cash instruments.

Michael Brown, a senior research strategist at Pepperstone, also advised short-term traders to have more cash on hand.

"Take down exposure to global equities, given how uncertain and volatile the environment is," he said.

5. Be wary of volatility-linked ETFs

Volatility-linked ETFs, which gain the more volatile markets are, have been a hot investment in recent weeks. In particular, retail investors scooped up the 2x Long VIX Futures ETF, a fund that tracks the market's volatility gauge, and the ProShares UltraPro Short QQQ an inverse investment product that gains when the Nasdaq 100 declines, Vanda data shows.

That strategy is one way to hedge risk in markets, but it can be extremely risky in itself, Berezin said, as volatility can drop quickly.

The VIX Index, the market's volatility gauge, is hovering around 26, down from its peak of 29 earlier this month. Hogan said it is possible volatility has already peaked.

"The volatility ETF is by its nature extremely volatile," he said of investors adding the instrument to their portfolios.

"I think it's probably not one that the average retail investor should be looking at," Pepperstone's Brown said.