The war in Iran has gotten most of the attention on Wall Street lately, and for good reason. Oil prices are surging and nobody seems to know how or when it will end. For that reason, it may be time to start thinking about ways to recession proof your investment portfolio.

Even if the war ends tomorrow, that doesn’t mean everything will be fine. Prior to the outbreak of the war there were already ominous signs that the U.S. economy is heading for a recession.

The pace of new homes sales plunged in January while the Producer Price Index soared the following month. Last week, the U.S. Bureau of Labor Statistics (BLS) reported “U.S. import prices increased 1.3 percent in February… following a 0.6 percent advance in January.” The BLS further observed, “Higher prices for nonfuel imports and fuel imports drove the increase in February.”

It should be noted that the big rise in import prices occurred prior to the outbreak of the war in Iran, which has resulted in a 50 percent jump in the price of crude oil. Presumably, much higher fuel prices this month will only drive import prices higher.

You get the picture. The economy was slowing down before the attack on Iran, and the higher fuel prices it created should accelerate that process.

If a long and deep recession occurs, then the safest way to avoid losing money in the stock market is to get out of it altogether. However, that is an extreme action that can backfire if the recession turns out to be short and shallow.

For that reason, I suggest owning shares of businesses that tend to do well when consumers are pinching pennies. To that end, below are three companies that could see heightened demand for their products if the economy does start contracting.

Dollar Tree

At first glance, big box retail behemoth Walmart (NSDQ: WMT) would be an obvious choice. Walmart has systematically upgraded its stores over the past several years to be tidy and less difficult to navigate. To the consternation of its competitors, the company’s management team has been able to do that while keeping prices low.

Wall Street has taken notice. Even after a recent pullback from above $134 to below $119 a week ago, WMT is valued at 40 times forward earnings compared to a multiple of 20 for the S&P 500 Index. That doesn’t leave much room for share price appreciation if the economy goes into recession.

However, deep discount retailer Dollar Tree (NSDQ: DLTR) is valued at only 16 times forward earnings, less than half the same multiple for Walmart. If more consumers start shopping at Dollar Tree stores during a recession, its earnings per share could increase at the same time Wall Street is willing to pay a higher multiple for those earnings.

Since the war began on February 27, DLTR is down 16 percent (through 3/24). At a recent share price near $107, the stock has given back all its gains over the past four months. That loss could be recouped quickly if a recession forces more shoppers into its stores.

Wendy’s

Food prices started rising a long time before the war in Iran started. Over the past five years, the Consumer Price Index for All Urban Consumers: Food in U.S. City Average has risen by 28 percent. That has already influenced consumer behavior, driving up demand for inexpensive meals.

That is one reason why fast-food giant McDonald’s (NYSE: MCD) is in positive territory this year while the S&P 500 Index is showing a loss. But even after a recent decline from above $340 to below $310, MCD is valued at 23 times forward earnings with a PEG (price/earnings-to-growth) ratio of 2.7.

However, fellow burger chain Wendy’s (NSDQ: WEN) is valued at only 12 times forward earnings with a PEG ratio of 1.2. Recently, the company became the object of a possible takeover by a private equity firm that feels Wendy’s is grossly undervalued.

Meanwhile, the company is aggressively implementing a turnaround plan to improve sales. And if a recession causes more people to eat at Wendy’s at the same time, its share price could quickly rally back above $10 from its recent price near $7.

The Gap

Over the past two years while the S&P 500 Index was rising 50 percent, apparel merchandiser The Gap (NYSE: GAP) gained no ground at all. It is still trading at the same $25 share price that it was then, rarely straying more than a few dollars one way or the other.

That comes as no surprise given the lack of growth in sales or profits over that span. But if the company’s guidance for this year is to be trusted, that may soon change.

When The Gap released its fiscal 2025 Q4 results on March 5, its guidance for this year included an increase in net sales of “2% to 3% year-over-year” and an increase in its adjusted/diluted earnings per share from $2.13 last year to “Approximately $2.20 to $2.35” in 2026.

Of course, those projections were made a few days after the outbreak of the war in Iran, so the company did not have time to factor that unexpected twist into its thinking. I’m no expert on the subject, but I believe a recession might drive more budget-conscious clothes shoppers into its stores.

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