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Iran and the Markets -2

09:58 03-Mar-26

Qatar has shut down production of LNG.  This, together with the virtual closure of the Strait of Hormuz, has sent hydrocarbon prices, and particularly European natural gas, even higher and reminded the market that war is inflationary.  The dollar strength reaction this service was looking for has materialized, though it is still measured at far less than a percent for non-euro pairs.  Assuming fatalities remain linear, length and breadth of the conflict will be most important.  Trump has penciled in 4-5 weeks, while noting there are no guarantees.  In keeping with the rank on this note, indexes getting back to positive territory yesterday seemed overdone.  War serves as a reality check and substantial market deleveraging most likely still needs to occur.

As expected, the press conference was initially positive for market indexes.  The main points from it were:

1. That four American soldiers are dead already.
2. Three F-15s were mistakenly shot down by Kuwait.
3. The goals are to destroy Iran's nuclear, naval and missile capabilities, with no particular rules of engagement or rebuilding goals.

This service projects that military for operations for Epic Fury will wrap up before the midterms regardless of the progress on the goals in #3 and that #1, which is most important will not rise to a level that will harm American market index levels on its own.  As mentioned below, it will attempt ongoing assessments of the extent to which it keeps domestic issues from receiving equal attention.

On 3/2/26 6:29 AM, CrowdWisers Administration wrote:

This service has been carefully monitoring the physical developments and market reaction to Israeli and American attacks on Iran throughout the weekend, and has the following observations:

Despite Trump's statement that American casualties are a possibility, there is little evidence against the assessment that the American military is preeminent.  The worst of Iran's retaliation is downed aircraft, including an F-15, in Kuwait, and that is likely due to Iran inducing friendly fire incidents via aerial saturation.  Though Iran's military has proven resilient to the killing not just its rahbar, but other political, military and intelligence leaders, it's unlikely that the saturation strategy can be maintained over an extended period.

As for the market reaction, the dollar strength predicted in the preeminent note has been surprisingly moderated since the attacks.  Our parent CrowdWisers service was apparently not alone in anticipating this action:

On 2/20/26 7:37 PM, Esekla wrote:

In a surprise Friday opinion dump, the SCotUS delivered the smack down to presidential IEEPA tariffs that I expected.  This will spawn enduring legal battles over $200b in refunds and to little to help the real economy as Trump pursues tariffs via other avenues.  Mostly, I see this as another data point in favor of the opinion that we're already past peak Trump influence.  Markets had an uncertainly positive reaction, but with no major economic data until PPI on Friday the 27th, it wouldn't be surprising to see them run for a bit next week, barring a misstep in Iran, where I do see increased prospects for military action.

However, insider trading and manipulated markets continue to be a concern.  This service has already posted publicly on the difference between prediction market bets and investing.

Although futures dropped initially, and then again as Iran retaliated, this service expects that we've already seen the worst of the short term market index reaction, especially with a press conference from Hegseth coming at 8AM.

The real dynamic for markets is more double-edged, medium term, and likely to center on the peak Trump dynamic.  Immediate reactions from western political leaders are fairly benign, and for now, this serves the White House purpose of distracting from this week's jobs data and other domestic issues.  However, it remains to be seen to what extent this action will generate traction in Congress to limit presidential war powers, and how public opinion will evolve on Israel getting its way with the White House yet again.

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