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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/stocks/three-reasons-t...


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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Or the U.S. could invade Kharg Island and start another Afghanistan-type slog.

I've been curious how the current conflict is different from Vietnam, Iraq, Afghanistan.

This article provides an answer:
https://x.com/SpencerGuard/status/2038110363749872...

The article did not discuss the options that Iran has. Perhaps that is the similarity to Vietnam, Iraq and Afghanistan. They all had options that didn't seem to be considered as probable by the U.S.

Aussi

1-Iran has been planning for this asymmetric war for decades.

2-No war has ever been decided by only aerial bombardment. Viet Nam absorbed more aerial ordinance than were spent in all of WWII by all sides.

3-The people of Iran are as likely to rise up, overthrow their rulers, and embrace the West as were the Iraqis, the Afghani's, etc, etc. (Note our successes in Chile, Guatemala, El Salvador, Cuba, Nicaragua, and previously in Iran.

4-A very large part of our national debt is secondary to failed international adventurism. Imagine these funds invested in our people and our country.

5- We are governed by buffoons.

fd

2-No war has ever been decided by only aerial bombardment.

Well, you could argue that Japan's surrender in 1945 was motivated entirely by bombing. The home islands were not invaded.

Steve

You might argue that with some merit. To extrapolate then, the US would need to nuke Iran and then occupy them, as we did Japan.

How well might that occupation go?

How well might that occupation go?

Send in the MAGA occupation force and see how many of them (do not) survive the duration.

Well, you could argue that Japan's surrender in 1945 was motivated entirely by bombing. The home islands were not invaded.

Pretty sure he meant “conventional bombing”. Also pretty sure you knew that.

But I would take issue with your use of the word “entirely”. Following Midway in 1942 the Japanese never had a significant victory against the Allies. Their Navy was destroyed, their Air Force so ineffective that they were reduced to using airplanes and barely trained recruits as guided missiles in suicide attacks.

Their defense of Okinawa and Iwo Jima were so costly that almost no Japanese survived. The Island campaigns decimated their conventional forces on Saipan and Guadalcanal. The Leyte Gulf was a debacle, and the Marianas became famous as “a turkey shoot.”

The Soviets abrogated their non-aggression pact in April 1945, which had allowed the Japanese to focus on the West, and later Manchuria was invaded and overrun.

The atomic bombs were used on August 6 and 9, and the Soviets invaded Manchuria on the 9th, before the Japanese cabinet had made as decision. So there was a lot of naval, airforce, and marine combat which got their attention well before Fat Man & Little Boy were deployed (*and even then the war council was evenly split, it took the unprecedented vote of the Emperor to agree to surrender.)

[sidebar] I have always marveled at our insistence on “complete and unconditional surrender” and then we turned around and agreed that the Emperor could stay. There were many in the Allies who thought he should be the first one hanged, but MacArthur made good use of him to subdue the population into accepting their fate. [/sidebar]

[sidebar2] It is known that Japan had made overtures to the US to surrender with conditions, routed through third parties - but the conditions were absurd, and included things like “No allied personnel in Japan” and “We will conduct our own war trials” and “We will disarm ourselves and decide what military industries will be allowed to continue” and so on. Obviously unacceptable. Laughable, even. [/sidebar2]

Well, you could argue that Japan's surrender in 1945 was motivated entirely by bombing. The home islands were not invaded.

Partially motivated by bombing, I'd agree. To set the stage, the IJN had once been the most powerful navy in the world and was reduced to only a few destroyers. The air force was down to a few hundred planes, lacked experienced pilots, and had no fuel to train them. The army was preparing for home island defense by teaching people to fight with sharpened bamboo sticks. Russia had just declared war and trounced a formerly elite army unit in Manchuria. It was crystal clear what the outcome was going to be. And even then there was a faction who felt surrender was dishonorable and wanted to continue fighting.

The bombing aspect alone destroyed 60% of Japanese cities. Are we willing to do that in Iran? The hope is the average Iranian hates their government and will use the opportunity to replace it. The thing is, as much as they may hate their government they hate the people who bombed their little girl's school even more.

Pretty sure he meant “conventional bombing”. Also pretty sure you knew that.

I was considering all sorts of bombs. You can level a city with conventional bombs, it just takes longer than a nuke. Look at what the Israelis have done to Gaza. Over 70,000 dead, that we know of. No knowing how many are buried under the rubble. And the bright sparks in the Israeli regime have said they want to do the same to Lebanon.

The Wiki entry shows 90,000–166,000 killed in Hiroshima, and 60,000–80,000 killed in Nagasaki. In comparison the firebomb raid on Tokyo killed 90,000 to 100,000, the preceding March. iirc, I have read somewhere that Curtis LeMay, who commanded the bombing offensive against Japan, said that, if the US had lost, he fully expected he would have been tried and convicted as a war criminal.

Steve

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