Good morning, investors. US stock markets opened red then bounced back during the first trading session of the week. Bitcoin and gold rallied, too.

But no asset class kept up with the stock market closest to the Iran conflict.

Israel’s big returns

Israel’s stock market is betting on a brighter future.

That’s been the trend for over a year and the latest conflict in Iran hasn’t derailed that optimism.

Israel’s primary stock index, the TA-125, surged more than 4.6% to hit a record Monday. That pushed its year-to-date return above 14%. 

Over the last 12 months, it’s gained over 66%. 

Global investors are effectively signaling that the current escalation and exchange of missiles, while volatile, could ultimately reduce Iran’s threat and influence in the region long-term.

Any muting or replacement of the existing Iranian regime would mark the removal of a geopolitical cloud that’s loomed over Israel — and so its equity markets — for decades.

Ballooning company valuations across Israeli defense, energy and financials suggest a strategic reset in how investors are assigning risk in the region. 

It’s true that wars are destructive in the near-term, but they can also clarify long-standing uncertainties. 

Over the last decade, Israel’s stock market traded with a persistent geopolitical discount tied to its proximity to a well-armed regional adversary with nuclear ambitions.

But the latest rally confirms that markets are indeed expecting that dynamic to change. 

The sector winners help explain the shift. Israel’s leading financial, defense and energy stocks have led the way, each of which point to improving capital flows, stability and domestic demand. 

To be sure, markets can be wrong.

A drawn-out conflict or military miscalculation could deflate the bullish narrative, and it’s a truism that geopolitics rarely resolves as expected.

Still, the market is sending a clear message for now. 

Stock prices are not moving as if the region is on the brink of catastrophe.

Rather, the trend implies a fast-improving outlook for Israeli companies and business conditions.

Veteran economist Ed Yardeni framed recent events as a transition from a wartime economy to one of peace. 

Near-term violence, in his view, will usher in a more stable and profitable era for the entire Middle East.

“Now [terrorist proxies have] lost their puppet master in Tehran,” Yardeni wrote in a note Monday.

“The Abraham Accords are likely to be expanded to include more Arab countries. The Israeli stock market has been discounting this scenario for the past two years.”

Buy, sell, and swap 80+ cryptocurrencies in your retirement account and pay less taxes. 

Double your dry powder by maxing 2025 & 2026 contributions now to earn up to a $2,000 bonus.

Don’t miss this rare Tax Season window — act by March 15 to maximize your crypto retirement.

📈 Gold prices soared again on Monday. Futures touched $5,400 before paring gains, with JPMorgan analysts forecasting another rally with the “risk premium” baked in from the Middle East. (Yahoo Finance)

💰Elon Musk’s xAI will buy back $3 billion in debt. The AI startup will make the move earlier than expected, ahead of its run-up to what’s expected to be a massive IPO. (Bloomberg)

🤖 Drowning in AI headlines? Mindstream is your calm, human-written brief that filters the noise with what actually matters for your business. Actionable takeaways to help you move from doomscrolling to doing with confidence. Subscribe today. 

I sat down with Trivariate Research founder and CEO Adam Parker — an elite semiconductor analyst and former chief US equity strategist for Morgan Stanley — to unpack the recent sell-off in software and the chip stocks to buy and sell for the year ahead.

Tune in on YouTube, Spotify, and Apple Podcasts.

🗓 March 3, 2008: Shares of Bear Stearns tumbled double-digits as rumors swirled about the firm’s liquidity position, deepening the anxiety around the subprime mortgage crisis.

📩 Want to get in front of 200,000+ investors who get this newsletter and the 350,000 professionals who can access it on Bloomberg Terminals? Reply to this email and tell us why we should work together.