The immediate winners from the military action in Iran are the U.S. dollar, gold, , and defense-related stocks, like , , and . Normally, military actions do not disrupt the stock market, but it is imperative that the ongoing military action is fast and furious, so it is over quickly. Under no circumstances does the U.S. want American hostages in Iran, since that was what destroyed Jimmy Carter’s presidency.
The Trump Administration has reshuffled world energy markets by getting India to stop buying Russian crude oil and by attacking Iran to remove the regime that has been funding terrorism. In his address to the nation, President Trump said that the goal of Operation Epic Fury is to eliminate Iran’s missiles, nuclear facilities, and leadership. President Trump said the military strikes are weakening Iran’s rulers and called on Iran’s people to take the opening as a once-in-a-generation chance to topple the regime.
Hopefully, this military action will wind down in the upcoming weeks. In the end, the Iran military action should remove major uncertainty in the world, and the stock market is expected to have a relief rally as new, pro-Western leadership in Iran emerges and crude oil exports resume.
The 10-year Treasury bond yield briefly fell below 4%, and mortgage rates are below 6%, which is the lowest rate since 2022. There is a flight to quality underway as some nervous investors flee stocks. AI derangement syndrome persists on the fears that unemployment will continue to soar as AI replaces workers. Although Nvidia’s founder, Jensen Huang, said that Wall Street was mistaken in thinking that AI was bad for software stocks.
In the meantime, the Financial Times reported that the private credit industry continues to lose its mojo as the Blue Owl fund freeze impedes other private credit companies like , , , and . Interestingly, Ares Capital Management (ARES) has been providing financing to Oracle’s data center expansion, so I suspect that it will re-emerge as the private credit leader due to its obviously safer loans.
If the cuts key interest rates, it will help the private credit industry stabilize a bit, but for the time being, I do not expect central banks to try to save the private credit industry, which has a good working relationship with many big banks. However, if some big banks have to have more write-downs from the private credit industry’s woes, then it will get the attention of the Fed and other central bankers.