Stocks Sink, Yields Rise as Pessimism Over War Grows
The Dow Jones Industrial Average tumbled on Friday. It fell into correction territory, while Brent topped $110 after incidents in the Strait of Hormuz exacerbated investors’ energy supply concerns. President Donald Trump’s latest comments failed to encourage traders to scoop up shares.
The 30-stock Dow fell 793.47 points, or 1.73%, to close at 45,166.64. The S&P 500 lost 1.67% and ended the session at a seven-month low of 6,368.85. The Nasdaq Composite dropped 2.15% and settled at 20,948.36.
The broad market index notched its fifth straight weekly decline, dropping 2.1% in the period. The tech-heavy Nasdaq slid 3.2% week to date, while the blue-chip Dow retreated nearly 1% for the week.
Friday’s slip comes a day after the Nasdaq on Thursday fell into a correction and has moved almost 13% below its record set in October. The Dow moved into correction territory Friday on an intraday basis and ended the session down 10% from its closing high. The S&P 500 is down 8.7% from its closing record.
International Brent crude futures rose 4.22% to settle at $112.57 per barrel. U.S. West Texas Intermediate futures settled 5.46% higher to end at $99.64 a barrel after earlier hitting a session high of $100.04. It was the highest close since July 2022 for both benchmarks.
President Donald Trump extended a deadline to attack Iran’s energy infrastructure to April 6, a little over a week after the original deadline that was set to end Friday.
“As per Iranian Government request, please let this statement serve to represent that I am pausing the period of Energy Plant destruction,” Trump said in a Truth Social post. “Talks are ongoing and, despite erroneous statements to the contrary by the Fake News Media, and others, they are going very well. Thank you for your attention to this matter!”
The announcement is the latest signal the Trump administration is seeking an end to the U.S.-Iran war, a conflict that has resulted in surging oil prices that’s already hurting voters at the pump and could cost Republicans their seats in the midterm elections.
Uncertainty remains for investors, however, after Iran’s foreign minister reportedly told state media this week that Tehran has no intention of holding talks with the U.S., even if its leaders are reviewing an American proposal to end the war. On top of that, The Wall Street Journal reported, citing people familiar with the matter, that the Pentagon was considering sending another 10,000 troops to the Middle East.
The Strait of Hormuz is closed, Iran’s Islamic Revolutionary Guard Corps has said to the country’s state media, adding that movement through the key waterway will face a harsh response. Two Chinese ships were turned away from crossing the Strait early Friday, and a Thai-flagged cargo ship that had been hit in the waterway has run aground, Iran state media said.
Even with Trump’s deadline extension, investors are at the point where they want to see a resolution to the conflict actually come to fruition as opposed to hearing there’s “just maybe” a resolution, said Jay Hatfield, founder and CEO at Infrastructure Capital Advisors.
A resolution would be a boon for the stock market, which has tumbled since the U.S. and Israel attacked Iran’s energy infrastructure on Feb. 28. The three major averages have each fallen more than 7% month to date.
“The longer the Strait is closed, the worse the oil market is going to get,” Hatfield said. “The price will go down a lot, but there’s still going to be an inventory issue when the Strait reopens, so if it takes another month to reopen the Strait, oil might stay at like $80 for a while until we can rebuild stocks.”
“It’s bad if there’s no resolution, even if there is a path to resolution,” he continued.
Chris Clark of MoneyWise also reports that Big Short investor Michael Burry says Trump's Iran war decisions are being driven by something other than foreign policy:
Gas prices and your retirement account shouldn’t feel like they’re reacting to the same headline, but lately they are. Renowned investor Michael Burry argues that the stock market isn’t just responding to the U.S. war with Iran but may also be shaping how quickly the U.S. tries to wrap it up.
Burry, the former hedge fund investor famous for predicting and profiting from the subprime mortgage crisis, argues President Donald Trump’s handling of the conflict in Iran — including reports that Trump was considering “winding down” the war — is being shaped by his allergy to market dips.
In a blunt Substack post (1), Burry called the stock market “Trump’s kryptonite,” saying his Iran strategy is “just get out before the market crashes too much. It’s a shame that Americans died for this.”
The reason Burry’s claim matters to everyday households is simple: when energy shocks mingle with persistent inflation and higher interest rates, consumer budgets tighten and retirement portfolios get shakier at the same time.
War and Wall Street as a pressure gauge
Consumers are feeling the familiar jolt of rising gas prices, one of the quickest ways a distant conflict can hit home. Threats to oil shipping tend to lift crude prices, which lifts gasoline costs, which in turn can keep inflation hotter for longer.
In a CNBC interview (2), Federal Reserve Bank of Chicago president Austan Goolsbee warned that, “What makes this a fraught but intense moment is nobody can tell us what is going to happen on the ground in the conflict in the Middle East, and how long that lasts.”
Consumer and investor anxiety is the backdrop for Burry’s provocative claim that market pain may be an invisible hand on foreign policy. If markets punish uncertainty, leaders who treat markets as a scoreboard may have an incentive to reduce that uncertainty, fast.
Reports about large, well-timed trades (3) placed just before Trump delayed or softened threatened strikes have intensified scrutiny of the conflict, but the White House has dismissed suggestions of coordination or market-driven war management.
There’s little denying that markets have been unusually jumpy. The S&P 500 first breached 7,000 on Jan. 28, a milestone widely tied to optimism around AI and expectations for easier monetary policy. By March 18, it closed at 6,624.70, its lowest close in nearly four months.
Oil has been even more dramatic since the start of the Iran conflict, rising and falling daily on the latest headlines about oil shipping lanes — including same-day swings that show how traders are repricing the conflict seemingly minute by minute.
Why Burry’s claim matters
Burry’s critique may resonate because it evokes how President Trump frequently talks about success.
In his February State of the Union speech (4), Trump boasted of dozens of stock market record highs and told Americans: “401(k)s and retirement accounts for the millions and the millions of Americans, they’re all gaining. Everybody is up, way up.” It’s an explicit connection between household well-being and market performance — suggesting it’s not a stretch to think market drops can become political pressure.
It’s also notable coming from Burry himself, a contrarian whose reputation rests on seeing incentives and market fragilities before others. Known as the “Big Short” investor, Burry made hundreds of millions of dollars for himself and investors by betting against the housing market ahead of the 2008 crisis (5).
For consumers, “war risk” often shows up as higher daily expenses and more volatile impacts on their savings. AAA put the national average gas price at $3.983 as of March 25 (6).
A Reuters/Ipsos poll (7) found 55% of Americans said their household finances had been hit at least “somewhat” by rising gas prices, and 87% expected prices to rise further over the next month because of the conflict.
Alright, another crazy week in markets and once again, it's all about the ongoing conflict in Iran.
Stocks popped on Monday following Trump's statement that he's delaying the bombing of power plants but resumed their downtrend for the remainder of the week.
Not surprisingly, Energy, Materials, Utilities and Staples were the best performing sectors this week while Communications Services, Information Technology, Financials and Consumer Discretionary posted the biggest losses:
In terms of large-cap US stocks, here are the best and worst performing stocks this week (full list here):
Again, if you drill down the full list, you'll see a lot of energy and materials stocks popped and conversely, tech stocks like Micron, Sandisk, Meta, Reddit, etc got hit really hard.
Basically, everything that was hot last year and in the first two months of this year got clobbered this month.
Many big tech names like Microsoft, Meta, and Oracle are down over 30% from their recent highs and the indexes are in correction mode but that can easily devolve into something worse if Trump decides to launch a full-blown ground invasion of Iran.
I doubt it will happen, however, as it's way too risky but with Trump, you never know, he says one thing and does another.
In this environment, investors are rightfully cautious.
Not surprisingly, the headlines are all negative and for good reason, the situation is precarious, oil prices are rising, stocks are sinking, and yields are rising.
As far as the Fed, the market is starting to think it might raise rates this year, but it's not going to happen because the fed funds rate is currently restrictive (above the inflation rate), so it wouldn't make sense for the Fed to raise rates in this uncertain environment.
So what next? I maintain that investors are tired of hearing Trump speak and post declarations, unless they see concrete steps that both sides are deescalating, this risk-off environment will continue.
But I do agree with Michael Burry, the stock market is “Trump’s kryptonite,” and he must be panicking here and wondering how he can undo the damage.
Unfortunately, I'm not sure there's much he can do apart from pulling out completely from Iran.
Let me end it there; it was a long week for everyone.
Below, former Dallas Fed President Richard Fisher joins 'Closing Bell' to discuss the Federal Reserve's current position, the central bank's dual mandate and much more.
Next, The S&P and Nasdaq are on track for their 5th straight negative week. The Investment Committee debate how to trade stocks as the Iran War weighs heavily on the markets.
Third, 3Fourteen's Warren Pies joins 'Closing Bell Overtime' to talk the impact of the global energy shock on oil prices, equity markets, and global supply.
Fourth, earlier today, Secretary of State Marco Rubio takes reporters' questions in Paris, France.
Lastly, President Trump says he's working on a deal to end the Iran war, more troops are heading to the region. PBS's John Yang discussed the capabilities of the forces and how they could be used with Joel Rayburn and Frederic Wehrey. Rayburn is a retired Army colonel and is now at the Hudson Institute. Wehrey is a retired Air Force lieutenant colonel now at the Carnegie Endowment for International Peace.
Let's all hope this war ends sooner rather than later.
Comments
Post a Comment