Twenty percent of the world's energy flows remain bottlenecked by the Straits of Hormuz. As oil prices stay high enough to cripple the global economy and drive inflation, Iran is counting on that leverage to back the world into a corner. And for now, it’s working.

 

It appears that the more real estate the U.S. and Israel destroy with their combined air power, the stronger the resolve by Iran's leaders to ignore Trump's "unconditional surrender." Rather than back down, Iran appears to be determined to not only widen the war to the entire region but also take their response outward to the rest of the world.

 

As the week wore on, the European Union's release of 400 million barrels of stockpiled oil on Wednesday barely dented Brent crude's price momentum. Meanwhile, the administration created even more chaos by claiming a tanker had been escorted through the Straits by a Navy ship. Prices went down once again, only to rise again after the energy secretary's tweet was taken down and denied. Ultimately, it turned out there was no escort, and the tanker in question was an Iranian vessel carrying oil destined for its largest customer, China.

 

On Friday, the administration announced it was easing its embargo on the purchase of Russian oil, and France and Italy approached Iran to see what it would take to allow European tankers through the straits. Administration officials also claimed that the U.S. Navy, together with a coalition of other nations' navies, would begin to escort ships through the Strait. That did halt the climb in oil prices at least momentarily.

 

And it wasn't only the price of oil that yo-yoed this week. Global markets responded in kind, trading lower as the self-inflicted chaos of contradictory statements surrounding the U.S. conduct of the war came into question. 

 

To date, a decision on releasing oil from the U.S. Strategic Reserve has still not been made, nor has it been decided when the Navy would escort tankers through the area "if needed." For anyone who has read my February column, "What is gunboat diplomacy without boats?" you know that our Navy just doesn't have the boats to spare for escort duty.

 

And while traders were laser-focused on oil prices, the Consumer Price Index for February came in as expected, with the inflation rate tied to the prior month's increase at 2.4 percent. The PCE came in worse than expected, rising 2.8 percent in January from a year ago. Readers are aware that I expect inflation to pick up starting this month and continue higher for several more months. The longer the price of crude remains in this range, the higher the inflation rate will be.

 

I also expect economic growth to slow in the months ahead for the same reason, while unemployment will also begin to tick up. The latest update to the fourth-quarter 2025 GDP has now fallen to just 0.7 percent. Economists are blaming the poor results on the government shutdown, which is convenient since the lack of government spending shaved 1.16 percent off fourth-quarter growth. Looking ahead, I expect the impact of higher gas prices on Americans will effectively cancel out any stimulus that may have accrued from the tax cuts in the spending bill passed last year.

 

As for labor, one of the consequences of voters' insistence on curbing immigration in last year's presidential elections is that the unemployment rate is rising. As Baby Boomers retire and AI reduces the demand for entry-level jobs in certain sectors, the U.S. labor market is in flux. Sure, there are jobs to be had, but no one wants to fill them. Americans have no interest in picking tomatoes, working as nannies, or painting homes. The moral of that tale is you reap what you sow.

 

On another front, private credit markets are still a troublesome corner of the market, and that issue appears to be widening. From a "nothing to see here" attitude among the nation's big banks, at least two are now marking down their loan portfolios or reducing the availability of credit to private lenders. In an already-skittish market, this doesn't help sentiment.

 

However, despite the bad news background, the overall markets are holding up. I credit that performance to investors' belief that this war will not last much longer. Investors know that one person started this war on a "feeling," according to his press secretary, and on the advice of his son-in-law, and only one person can call it off — Donald Trump.

 

The S&P 500 Index is only off around 4.3 percent from its all-time high and less than 2 percent year-to-date. Let's face it, despite the volatility, that loss is peanuts in the grand scheme of things. The equity markets were oversold coming into Friday, so the bounce was expected and could last into next week if we get through the weekend unscathed.

 

As I wrote last week, I still think we have a date with the 200-Day Moving Average, which isn't too far below (plus-1 percent). Most believe that the stock market acts as the tail that wags Donald Trump, America's Big Dog. I think that anything lower than a 7-10 percent decline would start the political jaw boning machine. I would expect statements like "we have already won," "mission accomplished," etc., etc. At that point, we bounce, the question is how long or how high?

 

I am becoming more selective and defensive in my stock and sector choices. As inflation heats up, I expect bond yields to rise. I still like commodity exposure, but fewer international investments as the dollar rises. I am not altogether convinced that April into May will see a revived stock market. Quite the contrary, but let's save that for another column.

 

The introduction of prediction markets such as Polymarket and Kalshi are exploding in popularity. At the same time crypto currency trading seems to be falling off a cliff. Are the two connected?

 

"Crypto is so yesterday," said one Gen Z trader, in response to my question. Younger investors are turning their attention to platforms where users can trade contracts on the outcome of future events. Today, one can bet on everything from the outcome of the mid-term elections to when the next Fed interest rate cut will occur. Not only can you bet on political or cultural events but increasingly on sports and real-world events.

 

I suspect that economic conditions  may be behind Gen Z's shifting preferences. The average salary for a Gen Z is under $40,000. Speculating in Bitcoin has become an expensive proposition with the price around $63,000 per coin. It has traded as high as $124,000. That is a far cry from the days of $15,000 or less.

 

That doesn't mean the younger generations are completely abandoning cryptocurrencies but are instead changing the way they speculate. In addition, the narrative has changed. The number of HODLs ("hold on for dear life") have declined as dreams of  a $1 million Bitcoin seem less feasible. Prediction markets offer a simpler, cheaper and more scalable alternative.

 

You can still bet on the future price of crypto, along with individual stocks, bonds, gold, or whatever. "Why buy Bitcoin when you can buy a cheap contract that offers you the same chance to profit?" argues another Gen Z trader. The simplicity of the prediction market structure is also appealing. There are no research reports, promises of gains or losses based on scenarios or schedules. The price you pay reflects a bet on a simple yes or no, to happen or not to happen. It appeals to a generation increasingly skeptical of project promises.

 

However, the prediction market uses cryptocurrency infrastructure to underpin its platform. Custody, settlement and payment processes run on block chain technology. With the support of stablecoins. Bitcoin contracts are still one of the most active speculative markets.  

 

Another encouraging development is that prediction market platforms are regulated by the Commodity Futures Reading Commission. As such all prices are set by buyers and sellers and not by "the house." In many ways, prediction market contracts are like trading futures contracts. You are essentially buying or selling a financial derivative when you invest in prediction contracts.

 

In 2025, this prediction markets saw trading volume expand to more than $27.9 billion. Open interest, which is the total value locked in contracts broke $1 billion. These contracts are both liquid and easy to trade. One can pay for them in both crypto currencies and regular currencies.

 

Supporters argue that these platforms represent a new frontier for fintech. Their platforms innovation has combined the blending of capital markets, crypto, prediction-economics and sports betting into one. The rapid growth in this new avenue of investment, speculation, or just plain gambling depending upon your view, has attracted outside investment. Several institutional players believe this new technology has enormous potential. The retail brokerage firm Robin Hood, as well as Coinbase Global, are entering the market. No surprise there, but some of the largest exchanges and financial institutions in the world are also embracing these betting platforms.

 

In October 2025, The New York Stock Exchange parent company, Intercontinental Exchange (ICE), purchased a $2 billion stake in prediction leader Polymarket. The S&P Down Jones Indices also announced a partnership with another fintech company, Dinari, to create a crypto-focused index. DraftKings and Flutter Entertainment, two sports betting operators, entered the prediction markets in December 2025. Flutter joined hands with the CME Group, to launch FanDuel Predicts in five U.S. states and plans to go nationwide this year.

 

Supporters argue that these platforms use innovation financial technology tools that allow traders to better discover efficient pricing of event risk. Yet prediction markets today are sitting astride several industry fault lines. Including sports on their platforms, for example, are encroaching on already established regulatory domains.

 

Many states are in an uproar as a result, predicting that these new markets make it easier for coaches, players, or referees to bet on matches they may be able to influence. The wave of recent betting scandals in 2025 makes regulator's fears that much more immediate. Rather than new investment alternatives, many regulators see them as an easy avenue toward further corruption.

 

This week two congress representatives Blake Moore, R-Utah, and Salud Carbajal, D-Calif., jumped into the fray by introducing legislation that would prohibit the listing of contracts for sale related to terrorism, assassination, war, gaming (sports or athletic competitions ), or illegal activity. Betting on certain outcomes in the U.S./Iran conflict may have sparked this bipartisan effort to reign in the prediction markets when it comes to what they deem to be threats to public safety and national security risks.

 

In my opinion, trying to stem the flow of this new prediction market arena in the age of AI is futile. Over the next 10 years, the sector is projected to reach a market size of $95 billion, with a growth rate of 47 percent.  Even an old codger like me, is already monitoring the betting on any number of events from war in Iran to the earnings on Nvidia. I suggest you do the same.

 

As we close out the first week of Donald Trump's attack on Iran, markets have succumbed to the relentless rise in oil prices. The higher the energy prices rise, the lower global stock markets will fall.

 

West Texas oil is up more than 25 percent this week compared to last week, not counting Friday morning's move. As I write this, crude is up another 10 percent today to $89.18/bbl. Stocks fell, and gas prices are already rising at the pump. The missiles are still flying, and neither side appears to be backing down.

 

"There will be no deal with Iran except UNCONDITIONAL SURRENDER!" said the president on Friday on Truth Social. Traders initially expected this attack to mirror the first in June 2025: a few days of bombing strategic targets followed by a presidential victory lap. It seemed an ideal buy-the-dip opportunity, but by week's end, profits were scarce.

 

Granted, the administration had warned Americans that this encounter would require "several weeks" to achieve their objectives. The first goal is the strategic destruction of Iran's war-faring and nuclear capabilities. The second objective is to institute a regime change in a country ruled by religious clerics. Critics argue that it is easier said than done.

 

Since the war department refuses to rule out "boots on the ground," the media assumes the worst. Meanwhile, over a dozen nations are caught in the crossfire, leaving images of burning refineries, shattered high-rises, and bodies on the nightly news.

 

Market participants are selling first and worrying about details later. Unexpectedly, traders have sold the year's top performers over laggards. This left many seasoned traders scratching their heads, since the normal playbook for what to buy and sell during geopolitical strife is not working this time around. Usually, market participants pile into U.S. Treasury bonds, precious metals, and other areas that provide some defense during market declines, not this time.

 

Precious metals, typically a haven, have dropped, as have utilities, treasury bonds, consumer durables, and industrials. Technology has fared better. Energy stocks are up, surging with oil prices.

 

Iran has declared a "holy war." If the Strait of Hormuz stays closed, considerable risk looms for global oil shipping (20 percent), fertilizer (30 percent), and LNG flows. Beyond defense stocks, likely sector winners are U.S. refiners and petrochemical firms, while airlines will be hardest hit.

 

Investors fear this conflict could last longer than most expect. The prediction markets do not believe Trump's assurances that it will be a four-week event. The betting leans heavily toward a ceasefire by the end of May (67 percent chance) and toward the conflict ending by June 30 (70 percent chance). If those odds are even close to coming true, then one can assume that oil prices would remain elevated or even rise further. Some are predicting a worst-case price of $120/bbl.

 

The inflation impact under those circumstances would be considerable. In which case, it would be doubtful the Fed would be willing to loosen monetary policy anytime soon. As a result, bond vigilantes are dumping bonds. Yields on Treasury bonds are rising, not falling (the 10-year Treasury at 4.12 percent), and the only real safe place to hide appears to be the U.S. dollar.

 

Regionally, Southeast Asia, a winner along with emerging markets in 2026, will be severely hurt by this war. Japan and South Korea rely most on Middle Eastern oil, while China purchases nearly all of Iran's. Europe is also battered by soaring natural gas prices due to a lack of LNG from the Gulf.

 

Although most investors are focused on the war, the U.S. non-farm payrolls report for February was a shocker as well. The economy shed 92,000 jobs in February, and the unemployment rate rose to 4.4 percent. On-going revisions of the data was disappointing as well. The Bureau of Labor Statistics revised downward December job gains from plus-48,000 to minus-17,000, while January was reduced by 4,000, from plus-130,000 to plus-126,000.

 

As for the markets, my warning of more volatility has proven conservative. If you give me an end date for the cessation of hostilities, I can give you a reasonable idea of where markets can go. In the meantime, there is a real possibility that the S&P 500 Index could  fall to the 200-Day Moving Average which is currently at 6,580. That would represent a 6.5 percent pullback, so we are already halfway there.

 

Iran is on everyone's radar screen. Markets are tumbling. Oil is skyrocketing, and explosions echo throughout our evening news shows. You may be nervous but remember that we have been here before.

 

And while war is a monstrous thing, its impact on your stock market investments is negligible. Last summer, I remember reading a J.P. Morgan research report that listed 36 geopolitical events between 1940 and 2022 that we could call crises. What they found was that in the first three months after an event, markets do underperform.

 

However, if you look at returns six and 12 months later, it was as if the risk event had never happened. You might know this, but in the heat of battle, many investors let emotions override their objectivity. Don't do it.

 

This conflict, although less than a week old, is playing out just like so many others. There has been a sharp sell-off in stocks and a flight to quality into the U.S. dollar. Energy prices, both for oil and gas, have also spiked, as they did on several prior occasions, most notably in 1973 and at the onset of Russia's invasion of Ukraine in 2022.

 

This time around, however, gold and even U.S. Treasury bonds, which are usually a "go-to" in times of geopolitical strife, have not responded as expected. It is unusual since gold has historically been one of the best-performing hedges against war risk. It may be that gold has already had a spectacular run both in 2025 and thus far in 2026. That may mean traders are hesitant to chase the price higher.

 

This war could curtail both energy shipments and production. Investors fear that rising energy prices may spark a resurgence in inflation. This is one reason the yield on longer-dated U.S. Treasury bonds spiked rather than fell. Higher yields and a stronger dollar — both antithetical to gold and other commodities — could also explain gold's poor performance.

 

Higher energy prices are among the main determinants of inflation, as energy permeates almost every aspect of the economy. The longer and steeper the price of oil and gas climbs, the higher the inflation rate. Herein lies the risk of the present conflict between Iran and the U.S.

 

Normally, as I said, wars in the past have had little to no impact on equity market returns on a one-year horizon; there have been exceptions. The 1973 oil crisis did have a lasting impact on returns. The reason had everything to do with a prolonged oil supply shortfall. That resulted in a two-fold hit to the U.S. economy as growth slowed and inflation rose, producing a period of stagflation.

 

This time around, we have a completely different scenario when discussing the energy markets. Back in 1973, America relied heavily on Middle Eastern oil, while U.S. production was already as high as it could be given the technology available at the time.

 

Today, the U.S. is among the world's leading energy producers, and the worldwide supply of oil and gas is plentiful. Bringing more of these resources online while the conflict continues may temporarily disrupt global markets, but few expect the energy shortfall to linger for many years. Remember 2022, the Russia/Ukraine war also spiked oil prices, but they quickly fell as additional oil supply came online.

 

We are in an era where trade wars, real wars, and repeated supply shocks challenge the world's economies and will continue for at least the next decade. Older generations must relinquish control so new leaders can guide us.

 

Unlike in prior decades, these new threats cannot be managed by an interest rate cut, a little more fiscal spending, or a protest march. Shocks to the system, whether through conflict, political and/or climate change, artificial intelligence, or pandemics, will require new leadership and policies. It is an age where economic and political relationships have been upended, and that, my dear reader, will continue.

 

 

As February ends, most stocks have gone nowhere. March tends to be better, closing higher 64 percent of the time. We can hope things improve, but hope is never a good investment strategy.

 

The carnage in the technology sector continued. While reporting stellar results, Nvidia, the AI semiconductor giant, failed to impress investors. Anemic bounces in other areas, such as software, did little to alter the mood. The market's schizophrenia continues.

 

About the only good thing one can say is that markets have held in there despite the technology sell-off. If you were fortunate or savvy enough to own stocks in emerging markets, precious metals, copper, energy, industrials, or small caps, your performance has been much better.

 

As I wrote last week, the Supreme Court ruling on Trump's tariffs was largely priced into the market. It offered only a day or two of volatility. Since then, the administration has faced more than 2,000 tariff refund lawsuits. Many fear their refunds will be delayed for a long time.

 

Markets soon returned to the threat of AI. "Threat?" you may say, what happened to AI, the linchpin of future productivity that has fueled all the buying over the last two years?

 

The narrative has changed. Today, it is all about fears that breakthroughs in artificial intelligence will affect companies' terminal values. Investors are fretting over whether AI will spell the end for certain industries and companies, or just cause widespread disruption. How much will software companies be worth ten years down the road? That is called a company's terminal value. Putting a number on its long-term worth is nigh on impossible. But that never stopped Wall Street from guessing.

 

This week, IBM's stock price crashed after Anthropic announced that its Claude Code tool could automate the modernization of COBOL systems on IBM mainframes. This business is core to Big Blue, and just the threat had investors dumping the stock. It was the steepest price drop ($31 billion) in more than 25 years for Big Blue.

 

Investors are seeking companies supposedly immune to AI disruption, yet few are truly immune to this trend. Sure, you still need trains, trucks, and airplanes to transport, or picks, shovels, and equipment to extract gold or silver, but creating an investment case based on this thinking makes little sense to me.

 

In every industrial revolution, massive changes have triggered fear. Fear of lost jobs, of a great uprooting of lives, of social disruption. In some cases, traditional processes fall by the wayside or evolve into something new and beneficial. It takes time to parse out these changes. It can't be accomplished in a week or a month.

 

Emotions are running high right now, but calmer heads will prevail. The truth is that the financial community almost always needs a story to justify price movements, no matter how far-fetched. Why not just accept that the entire technology sector, after a three-year run, needs a period of profit-taking and consolidation? In the meantime, sectors that have been ignored until now are having their day in the sun.

 

Cryptocurrencies attempted a bounce this week, but it was short-lived, while gold, silver, copper, etc. have been in a trading range. The biggest winner of the court's tariff turndown has been emerging markets. Given that they were hurt the most by the levees, their bounce back makes sense.

 

As we enter March, I am expecting this volatility to continue. My feeling is that markets need a trigger (up or down) to break this trading range. It could be conflict in the Middle East, or peace. Some hoped the State of the Union address might enliven buyers, and it did for one day, but profit-taking quickly ensued.

 

I advised readers to focus on the 6,900 level on the S&P 500 Index. Above it, positive; below it, negative. This week, we have had four days below and one above. That is called volatility. Expect more of the same.