War broke out in the Middle East over the weekend.

If you read Thursday’s Truth & Trends, then the news shouldn’t have come as a surprise.

I wrote to you that it appeared the U.S. and Israel were getting ready to attack Iran as early as Friday.

And less than 48 hours after my note hit your inbox, it happened.

So now that the attack has actually taken place, what do I think happens next?

Here are my thoughts on the overall outcome when it comes to stocks, oil, and politics.

The Stock Market

Here’s a table showing the market’s reaction to geopolitical and major historical events over the past 85 years.

Source: Carson Investment Group

The data shows that the impact on the stock market going out one month, three months, six months, and one year is minimal.

In fact, the stock market performance looks similar to any other period.

That’s not to say major geopolitical events never have an impact on the stock market. But fewer of them do than you might expect.

There have been two instances in my career — Sept. 11 and Russia’s invasion of Ukraine — when a military action has had a negative impact on stocks one year later.

Both of those situations were huge surprises that came during a period of stress in the stock market and economy.

The attack on Iran over the weekend wasn’t all that surprising. And I would argue that market stress isn’t really a factor here either.

Sure, there’s some weakness in the market right now. But with the equal-weighted S&P 500 hitting a new closing high just last week, we are definitely not in a bear market.

As a result, I think that the war with Iran ultimately will not have a great impact on the U.S. economy and stock market.

If it did, how would that happen? The answer is oil.

The Price of Oil

Over my 30-year career, I have had a pretty good track record with energy stocks and predicting the price of oil.

The key to my success has been using a very simple framework.

First, I start by looking at the price action in oil prices. Here’s a chart of oil prices over the last 10 years.

The first observation is that oil prices have been in a range of $40 to $85 or the vast majority of the time.

There was a technically oriented breakdown around COVID. But prices have never really broken below the marginal cost of production at around $40 per barrel.

Oil prices did go higher after Russia’s surprise Ukraine invasion back in 2022. And that brings me to my second observation.

Oil is really not doing that much recently.

Even though a conflict in Iran and its impact on the Gulf could have a much greater impact on oil supply, the price hasn’t really moved much.

Here’s the chart over the last year.

Sure, it has gone from a low of $55 back in December to $67 at the end of last week. But that’s the middle of the range where it has been for the last year.

Even the rally today has faded quickly.

The market itself is telling us that supply is robust and the risk is negligible.

A lot of factors go into this equation, and I am not going to dive into all of them here. But the price tells us a lot.

There's one other “big picture” analysis that I use — looking at the goals of the major consumers and suppliers of oil.

Here’s what I see:

• Trump wants lower oil prices…
• China wants lower oil prices…
• Europe wants lower oil prices…
• India wants lower oil prices…
• Trump wants to pump more oil…
• Venezuela wants to sell more oil…
• Russia wants to sell its oil…
• And Iran wants to sell its oil.

There could be volatility in the near-term.

But when the largest consumers want a lower price and half of the world's production wants to sell more, prices go LOWER.

We’ll see what happens, but I think $45 oil by year-end is a lot more likely than $100 per barrel.

The Political Outcome

There’s a lot of criticism of the Trump administration out there from all sides of the political spectrum.

Without wading too far into the debate, I do disagree with one of the core criticisms. I think there IS a plan.

It was laid out this morning in the press conference from Secretary of War Pete Hegseth and General Dan Caine regarding “Operation Epic Fury.”

If you haven’t watched it already, I highly recommend you do.

The goal is to disable Iran’s military capabilities to threaten and destabilize the region. Also, to disable their ability to prevent attacks on their nuclear development plan.

I believe that the Trump administration is willing to spend five or so weeks pounding Iran (along with help from the Israelis and others) to do as much damage as possible to their capabilities.

I also believe that they will stop at the end of this period.

If the Iranian people can rally and force out the regime during this period, then great. But I think the U.S. will still stop after this period, whether the regime survives or not.

If the Trump administration thinks they need to return in 18 months and debilitate the regime again, then they will do it.

While Trump would clearly prefer to have a friendly Iranian government in place, his most important goal is to eliminate the threat any regime could pose.

The Trump administration will not risk American troops on the ground. It’s not necessary to achieve their goal.

The administration has been very clear about its plans so far, whether folks want to believe them or not.

And I think within the next five weeks or so, they will make good on their plans.