Subject: Control Panel: Iran War, trends continue
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All METARs are aware that the attacks on Iran by the U.S. and Israel and Iran’s response have impacted both the stock and bond markets adversely. Prices of both stocks and bonds have dropped. (Bond interest rates rise when prices fall.)

The war is only a few weeks old. Since Iran never threatened the U.S. directly and the attack was made without input from Congress or any allies other than Israel, President Trump could end U.S. participation anytime with the same impulsive wave of the hand that he started it. There’s tremendous uncertainty since one day Trump says there are negotiations (denied by the Iranians) but the next day he is sending U.S. Marines to the Middle East.

https://www.wsj.com/finance/st...


Three Reasons the Stock Market Can Endure the War
Stocks haven’t fallen as much as you might expect given the Iran war. There are good reasons for that.

By James Mackintosh, The Wall Street Journal, March 29, 2026

…
The S&P 500 is down 7.4% from its prewar high, only slightly more than falls over the same period in May 2019 or April 2018—neither at all memorable. …

Here are three supports: recent military history, U.S. earnings and hopes for artificial intelligence…

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The four great bear markets of the past century—the Great Depression, the 1973-74 oil embargo, the dot-com crash and the 2007-09 financial crisis—were much worse for global stocks than either of the world wars…

Forecasts for company earnings on the S&P 500 over the next 12 months have gone up since the first attacks on Iran. Wall Street’s expectations for earnings per share are up 3.6%, the fastest over such a short period in five years…every sector’s earnings estimates have risen since the U.S.-Israeli attack began, with the technology sector seeing its biggest increase over a four-week period since the data began in 1995…

Hopes for the AI boom continue to support the market, with investors betting that money will keep pouring into data centers needing shed loads of new microchips… [end quote]

SPX has fallen almost 10% from its peak. But it could get much worse. Or it could get better.

The Fear & Greed Index is in Extreme Fear - 10, which is a very low reading. VIX, sometimes called the “Fear Index” but is actually a measure of volatility, is moderately high and heading up toward 30 which is breached during bear markets like 2002 (the end of the dot-com crash), 2010 (the European GFC) and 2022. The real concern is VIX over 40 which indicates a rare financial crisis (2008, 2020) when the Federal Reserve is forced to step in to protect the financial system.

I’m more concerned about the resemblance of the market to the dot-com and internet build-out era than I am about the Iran War. Stocks are in a bubble. The companies driving the bubble are borrowing heavily to build data centers. Their projected profits can’t possibly cover their borrowing and their sales are mostly to each other and not to end-user customers.

Financial stress is increasing although the level is still low. The Chicago Fed’s National Financial Conditions Index (NFCI), which provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems, shows that conditions are tightening.

Inflation is rising.

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The Atlanta Fed’s GDP Now Latest GDPNow Estimate of growth rate of real gross domestic product (GDP) for 2026:Q1 was 2.0% on March 23, 2026. This is a respectable growth rate and certainly not recessionary even though it has declined over the past month.

Between the high inflation and reasonably strong economy the Federal Reserve will have no reason to cut the fed funds rate. The options market has dropped the possibility of a fed funds cut and is now pricing in a chance of a fed funds rise.

The bond market is losing confidence in U.S. Treasuries. The entire Treasury yield curve shifted up in the past week. Treasuries have actually dropped faster than junk bonds.

USD strengthened. Gold and silver dropped, probably because speculators are selling their precious metal bubble positions to meet margin calls on falling stocks. Oil is rising as 20% of the world supply moves through the Strait of Hormuz which is closed by Iran.

The closure will impact prices all over the world, including fertilizer which is needed for the spring planting season. Farmers in the U.S. and Asia are already switching to “low-input” crops (like soybeans) or using less fertilizer. This won’t show up in the CPI today, but it guarantees a food inflation spike in late 2026/early 2027 that the Fed and markets are not currently pricing in.

Qatar produces roughly one-third of the world’s helium, which is essential for cooling the high-end semiconductor manufacturing equipment used for AI chips. With the Strait of Hormuz closed and drone strikes affecting Qatari LNG facilities (helium is a byproduct of LNG), spot prices for helium have surged over 40% in the last month. If chipmakers can’t get helium, the “data center build-out” hits a literal production wall. This could be the pin that pops the AI borrowing bubble, as companies won’t be able to deliver the hardware their borrowing is predicated on.

The METAR for next week is rainy but probably not stormy. I anticipate a continuation of the downward trends but not (yet) a crisis or sudden break in the markets. The situation is highly uncertain. The markets could jump with joy if TACO. Or the U.S. could invade Kharg Island and start another Afghanistan-type slog.

Wendy
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