By Angela Palumbo
While stocks are falling in response to the war in Iran, the artificial intelligence trade is still a major part of where the market goes from here.
The U.S. and Israel launched a joint attack on Iran on Feb. 28, and Wall Street is now keenly focused on how the war will affect the U.S. economy. Oil prices are rising, which could hit energy costs. That could lead to shoppers pulling back spending and, in the future, might even prompt the Federal Reserve to rethink further interest rate cuts.
The Dow Jones Industrial Average has dropped 1,023.18 points or 2.1% this week, according to Dow Jones Market Data
While these fresh concerns play out, the AI impacts that have been moving the market haven't gone away and will most likely be here long after questions about what affects the war has on stocks plays out.
"Over the medium to longer term, absolutely AI is still the most important dynamic in the market," John Belton, portfolio manager at Gabelli Funds, told Barron's.
Tech stocks were a top focus for investors way before the war began. Excitement about how AI would boost companies and their growth has been the biggest driver of the market's rally over the past few years. The Nasdaq Composite jumped 20% in 2025 as investors bet on companies they thought would benefit from the future of the new and evolving tech.
The tech trade has been under pressure recently, though. Companies like Meta Platforms and Alphabet have committed to spending hundreds of billions of dollars on building out the infrastructure to power AI. Investors have grown impatient as they want to see returns on these investments. There's also the concerns that AI will replace software capabilities, leading to a selloff in that sector. Semiconductor stocks have also taken a beating as investors worry about decelerating growth.
The Nasdaq Composite has dropped 2.1% in 2026.
It will take a long time for these concerns to be allayed.
"Medium to longer term, I do think the for the index to work sustainably higher, you need these large tech stocks to start working again. And for that to happen I think you need improved sentiment around the AI capex cycle," Belton said.
Belton added that sentiment would improve if companies that are spending big could show that they're getting solid returns on their investment dollars. That's not going to happen right away.
Meanwhile, George Smith, portfolio strategist for LPL Financial, wrote on Wednesday that while geopolitical developments like the war in Iran tend to cause uncertainty and anxiety for Wall Street, "history consistently shows that markets are far more resilient than most investors expect."
Smith wrote that across more than two dozen major geopolitical events since World War II, the S&P 500 has produced an average one-day decline of just 1%. He added that markets tend to "absorb shocks quickly," bottoming on average within 18 days, and recover within a matter of weeks.
Belton said it's important to remember that every conflict is different. If this one lasts longer than the administration is calculating, he says consumer confidence could drag, businesses could pause investment plans, and overall uncertainty could linger.
However, he added that this conflict could also fade into the background, and "if you do get a line of sight to normalcy, or towards a resolution, that's where things can snap back."
Regardless of the outcome, the importance of AI on the market's performance is still key.
Write to Angela Palumbo at angela.palumbo@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 05, 2026 17:54 ET (22:54 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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