The markets don't seem terribly concerned about the threat of war between the United States and Iran. While the Dow plunged 300 points in its first session following the drone strike that killed Iranian General Soleimani, they quickly stabilized, and then resumed rising.

But what if investors are being too sanguine about what might lie ahead? It's conceivable that the death of Soleimani, and the retaliatory missile strike from Iran, will turn out to be the beginning, and not the end, of this story.

If that's the case – and it's worth at least considering the possibility that more shoes will drop – then the markets could drop significantly.

For the moment, tensions between the two countries have dropped. Both sides could claim that they scored a point, and move on. But Iran could launch further attacks, on U.S. bases around the world, or in the U.S. itself, including the threat of cyberattacks.

And there's another source of friction that could easily spark into a major conflict. After the strike against Soleimani, Iran announced that it would pull out of the 2015 anti-nuclear agreement it negotiated with the United States and other countries.

That means Iran could start enriching uranium again immediately, and hypothetically have a nuclear weapon in just about a year. That raises the possibility of a pre-emptive U.S. strike against Iranian nuclear facilities in 2020. Iran would likely retaliate, and a full-scale war isn't out of the question.

In such a scenario, stocks would likely take a hit. Remember, the Dow fell over 13% in the period after Iraq's 1990 invasion of Kuwait and the start of the U.S. military offensive against Iraq. This time, the market action would come in the 11th year of a bull market, with stocks at record levels; this could make a drop especially sharp.

Is the scenario a worst-case one? Perhaps. But when it comes to investing, it's better to be safe than sorry. In times of uncertainty, you want to make sure you're making the right bets in your portfolio. Now is a good time to rebalance your holdings, and to reconsider investments that might have too much exposure to geopolitical risks.