New York CNN Business  — 

Welcome to an election-year economy with a new tension for investors: the threat of escalation with Iran.

Stocks and oil stabilized overnight, but the 2019 stock market rally has stalled until it becomes clear when and how Iran will retaliate. Bond yields are well below 2% and gold sits at nearly a 7-year high, both signaling that fear still prevails.

Wall Street analysts are gaming out scenarios ranging from a short and quick military response to cyber-attacks, harassment of oil tankers in the Persian Gulf and terror attacks by proxies. (No one predicts a conventional war.)

History shows us that unexpected terrorist and military conflicts ranging from Pearl Harbor, the Cuban Missile Crisis, 9-11 and others typically cause a sharp market response, then consolidation, then recovery. Wall Street veteran Sam Stovall, chief investment strategist at CFRA, has charted market reaction to such shocks and finds, over time, markets tend to recover unless the shock brings a global recession.

“Chances are this decline will represent yet another reason to buy than bail,” he says.

The question is, how long does that take? Stocks bounced from session lows Monday on that very theory. But higher gas and oil prices would be an unwelcome addition to the Trump Economy in an election year.

Near-term, gas market experts predict anything from three to 10 cents higher on gas prices because of the Iran uncertainty. What will happen in the longer term depends on Iran’s response. Iran’s enemy Saudi Arabia has room to open the spigots to counter any spikes in oil prices on supply concerns. But Saudi Arabia is also vulnerable to attacks from Iran, as we saw in September when Iran was blamed for bombing key Saudi oil fields and infrastructure, driving oil prices up 14% in days.

In short, if 2019 was a guessing game about the trade war with China, 2020 will feature Iran.