Iran War escalates again, and hopes for a workable ceasefire solution are fading. Trump is rattling his saber hard. is up 7% this morning, with WTI now back above $75/bbl. Energy stocks are up 2%. This geopolitical Black Swan has become a Black Phoenix that keeps arising when it appears to be close to the end.
Interest rates have jumped on the inflation implications. The is up 5bps to 4.21%, back to where we were when concerns about the new hawkish Fed chairman took over. The is up 6bps to above 4.58%, where we were in March when crude oil prices were much higher.
The has gapped up to 18, and the has dropped nearly 100 points since the conflict has heated up again. Travel stocks are down, with airlines down 3.6% today, down 5.7% this week. Interestingly, semiconductors are in the green, up 0.5% today, though still down 7.1% in the trailing week. is up 1.1%. Tech overall is only down 0.2%, leaving the down only 0.6%, while the is down 1.4%. The S&P market weight is down 0.8% while the is down 1.3%.
It’s a risk-off day on the Iran news. Investors, however, have become conditioned to not overreact to threats by Trump, as it is his negotiation style. Since the conflict began, the oil market has adjusted supplies from non-Hormuz sources and ramped refining production. It’s also notable that interest rates were remaining high even as crude prices were falling.
While further downside is likely if the Iran situation spins out of control, the earnings season, which starts next week, should have a greater influence and is still expected to be very strong. Iran is a real short-term risk, but its eventual end should bring a meaningful relief rally that no one wants to miss.