(MONEY Magazine) – According to the March UBS Index of Investor Optimism, 74% of investors think the situation in Iraq could hurt the U.S. investment climate. And that survey took place before the major fighting broke out in Falluja and Sadr City.

But should the scary headlines from Iraq make you bearish? Not by themselves. Tracy Eichler, U.S. investment strategist at UBS, says long-term investors should be more concerned with earnings and interest rates. At the moment, at least earnings are still headed in the right direction.

Even market watchers who are pessimistic right now count the war as just one of several risks. "Iraq is an incremental factor," says Tobias Levkovich, chief U.S. equity strategist at Smith Barney. His other worries include the presidential election, rising oil and energy prices, and inflation. Levkovich adds that some anxiety about the war is already built into current prices. The bottom line: Keep a close eye on the world news, but don't stop reading the financial pages. --MEGAN JOHNSTON