Iran fired missiles at US bases and allied targets in several countries, with explosions reported in Dubai, Riyadh, Abu Dhabi, Bahrain, and Kuwait. The escalation followed the assassination of Iran's Supreme Leader Ayatollah Ali Khamenei in a joint operation.

Israeli officials also listed several high-ranking figures killed in the first wave, including Defense Minister Aziz Nasirzadeh, Security Council head Ali Shamkhani, and IRGC commander Mohammad Pakpour.

Despite the dramatic geopolitical turn, some strategists cautioned that the market impact could be limited. Vital Knowledge analyst Adam Crisafulli said recent history shows that stock markets tend to absorb such shocks.

"As has been the case over the past few years, with numerous instances of clearly significant geopolitical conflicts, the impact on US equities is typically ephemeral, and there's no reason to believe this time will be any different," Crisafulli said.

Barclays head of research Ajay Rajadhyaksha took a more cautious stance. He said Iran "may not have the capacity to wage a sustained military campaign," adding that the missile attack could be aimed primarily at domestic audiences, "demonstrating resolve without crossing a threshold that requires further US retaliation."

However, Rajadhyaksha cautioned that the risk landscape has changed. While there are reasons for the conflict to remain localized, he said the tail risk of a wider conflagration is higher than in recent years. Investors should resist the urge to immediately buy into any market dip, he added. "History strongly supports selling the geopolitical risk premium when hostilities erupt," Rajadhyaksha said. But he cautioned that markets may be underestimating the likelihood that tensions will persist.

"We recommend against buying into any immediate dip—the risk-reward profile does not appear attractive. If stocks fall significantly enough (say, more than 10% in the S&P 500), it will likely be a good time to buy. But not now," Rajadhyaksha concluded.