Citi analyst Scott Chronert warns the Iran conflict creates market uncertainty, with the Strait of Hormuz emerging as a critical risk point. The bank suggests an effective closure there could push oil prices even higher, though Citi maintains its 2026 U.S. equity outlook while acknowledging heightened shorter-term risks for the S&P 500 amid growing geopolitical tensions.

Chronert draws historical parallels to the 2011 Libya intervention, noting equities initially sold off before strikes but rallied into the event. Similar patterns emerged following last summer's strikes on Iran's nuclear facilities. However, Citi emphasizes other macro factors ultimately dictated 2011 market performance, with the S&P 500 finishing flat despite 12% earnings growth.

Despite current pressures including AI disruption narratives and software sector sell-offs, the S&P 500 remains essentially flat year-to-date. Citi advises investors to prepare for unintended consequences from the Iran conflict, including inflation effects and economic headwinds. The bank suggests U.S. markets may serve as a relative safe haven if oil prices continue trending higher.