Iran's strike on Israel raises market risks

Unrest in the Middle East shows up in gold, equities, and oil

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Good morning investors.

On Saturday, Iran launched a missile and drone attack against Israel.

In today’s edition, we will focus specifically on ramifications for markets. For geopolitical coverage, I recommend the The Financial Times’ and The Wall Street Journal’s reporting.

Let’s get started.

*At a glance:

*Pre-market data and moves as of Sunday, 9:00 p.m. ET

Middle East tumult raises market risks

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Iran sent a volley of missiles and drones toward Israel on Saturday, but the Jewish nation emerged largely unscathed.

A robust air-defense system, as well as help from the US and other allies, helped minimize the damage.

Yet further escalation in the Middle East would give global investors one more uncertainty to account for, on top of:

In times of geopolitical strife, investors typically flock to safe-haven assets such as gold, cash, and bonds.

That was already happening before this weekend.

“The Iran attack piles onto investors’ fears,” market strategist Callie Cox told me.

Gold continues to break records, and the US dollar just saw its strongest week against rival currencies since 2022.

Several wealth managers, meanwhile, have told me they’ve been telling clients recently to take advantage of attractive Treasury yields.

“Investors are already antsy,” Cox said. “We already have a few hints, with the immediate [negative] reaction in crypto, which trades 24-7. It’s a matter of time before that shows up in the stock market.”

To her point, each of the most popular cryptocurrencies saw sharp sell-offs this weekend after news broke of Iran’s attack.

Tokens don’t always correlate with stocks, but they can. As a result, some traders say they’re bracing for a choppy week of equity trading.

“The worst-case scenario could be pretty bad [in the Middle East],” Cox said. “So these headlines might be enough tinder to cause investors to panic sell, at least for a little bit.”

To be sure, stocks have looked vulnerable to a pullback for some time now.

It’s strange, for example, how often the S&P 500 has touched multiple all-time highs this year even though interest rates remain squarely above 5%.

Fresh geopolitical uncertainty, in turn, only gives investors more reason to second-guess the current landscape.

While further conflict in the Middle East could lead to humanitarian and political crises, it’s worth noting that these events wouldn’t necessarily impact the US economy.

Iran aside, markets remain dialed in on a promising earnings season and the outlook for Federal Reserve.

S&P 500 companies will likely report earnings growth of at least 7% higher than a year ago, according to FactSet.

That would mark the third consecutive quarter of year-over-year growth — which Cox said looks like a “darn-good backdrop for long-term investors.”

As far as rate cuts, strategists at Capital Economics ultimately don’t expect turmoil in the Middle East to alter the Fed’s policy plan.

“As things stand our sense is that events in the Middle East will add to the reasons for the Fed to adopt a more cautious approach to rate cuts, but they won’t prevent it from cutting altogether,” chief economist Neil Shearing said.

“We expect the first move in September.”


  • The dip in tech stocks is a buying opportunity, according to Wedbush strategist Dan Ives. He expects upbeat earnings to push equities higher for the rest of the year. (Wedbush client research)

  • America’s bonds are getting harder to sell. Tepid demand for US Treasurys have raised concerns that markets will struggle to absorb the upcoming flood of government’s debt. (WSJ)

  • Bitcoin’s halving is slated for this week. Once this happens, the amount of bitcoin rewarded to miners gets cut in half. That could force some mining firms to consider relocating to cheaper and riskier countries. (BI)

Rapid-fire headlines:

  • March retail sales data is due at 8:30 a.m. ET

  • Goldman Sachs and Charles Schwab report earnings today (Barron’s)

  • Whispers of $100-a-barrel oil are coming back (Bloomberg)

  • China’s capital markets activity hit a multi-decade low (FT)

  • US-China relations are the top uncertainty for Chinese investors (Bloomberg)

Last thing:

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