In the first quarter of 2026, the Dow Jones Industrial Average (^DJI +0.73%) experienced a 10% correction, its biggest drop since early 2025. Megacap tech stocks, which had been pulling the markets higher, became average performers.
But over the past few weeks, stocks have made a rapid recovery. The U.S.-Iran ceasefire raised hope that a long-term resolution could be reached, which was enough to flip investor sentiment back to positive.
That rapid decline-and-recovery pattern was not unusual for a geopolitically driven market event. If you look back at history, corrections of 5% to 10% are relatively normal, as are quick rebounds that erase those declines within a couple of months.
But not every investor got to experience this recent rebound. A lot of people reacted to the pullback and got out of stocks as they fell, leaving them with their money on the sidelines when the recovery arrived. This is something that occurs often, and it can be one of the more damaging things to an investor's long-term returns.
If there's one thing that the market's reaction to the Iran conflict has reminded us of, it's the value of long-term, buy-and-hold investing.
Image source: Getty Images.
Key takeaways
- The Dow fell by 10% from mid-February to late March. It has since recovered around two-thirds of that decline.
- On average, it takes the market about three months to recover from a 5% to 10% decline. For pullbacks triggered by a geopolitical shock, the recovery period averages about half that.
- Geopolitically driven market drawdowns are typically around 7%.
- The Dow has recouped about two-thirds of its current drawdown. That's right on schedule, historically.
- Given the rapid snapbacks that often occur during periods like this, investors are better off staying invested amid the volatility.
The historical pattern is remarkably consistent
Events like the Iran war are called geopolitical shocks for a reason. They "shock" the markets into a sense of fear, and stock prices drop. But many geopolitical events are short-term. Once there's a resolution, stock prices rebound, often to above pre-conflict levels.
As Iran and the United States traded threats, volatility picked up and the Dow began falling. At its low point, it was down about 10%. But after a ceasefire was announced on April 8, stocks rebounded quickly. Whether this ceasefire will hold or not remains to be seen. But the pattern of stock market behavior we're seeing is consistent with past geopolitical disruptions.
- 9/11 terrorist attacks: Stocks dropped 12% but recovered in less than two months.
- Start of Russia's invasion of Ukraine: Stocks dropped 7% but recovered in about a month.
- Start of the 2003 Iraq War: Stocks dropped 15% but recovered in less than two months.
- Current Iran conflict: Stocks dropped 10% but have recovered two-thirds of their value.
In other words, this event's rebound is on pace with past rebounds. If history is any guide, the Dow could recapture the last 3% within the next month or so.
Geopolitical corrections vs. typical corrections
The average geopolitical shock sees roughly the same market decline as the typical garden-variety pullback, but recovers in about half the time.
| Event Type | Average Decline | Average Recovery Time |
|---|---|---|
| Geopolitical shock | 7% | Approximately 1-2 months |
| Average pullback (5%-10% decline) | 7% | Approximately 3 months |
| Average correction (10%-20% decline) | 14% | Approximately 8 months |
| Average bear market (20% or more decline) | 32% | Approximately 30 months |
Data sources: The Motley Fool, LPL Financial, American Century.
This is consistent with what you'd expect to see in an event where conditions can change rapidly.
But it reinforces a more important notion. Geopolitical events come with unpredictable timelines. A war may look like it will drag on indefinitely, only to be resolved in a week. That kind of uncertainty makes it even more difficult than usual to time the market in any way.
Volatility is a normal part of investing in stocks. Given the modest pullbacks and quick rebounds that occur during typical geopolitical events, it's usually best to just sit tight, hold onto the stocks you own, perhaps jump on a few buy-the-dip opportunities if you have money to deploy, and wait for history to take its course. Even under less-fraught conditions, market timing is usually a tactic that will prove harmful to your long-term investing returns. It can be especially so during geopolitical events.
