Stock Market Reaction to Iran De Escalation Priced In Big Risk

In today's video, I want to help you understand the financial and stock market situation regarding Iran. And today's video is not going to be political whatsoever. We're just focusing on the financial aspects. So at the time making this video, the S&P 500 is flat. So as you probably saw, it opened up lower. It turned positive. Right now, it's up 0.08%. So it's basically no reaction, or you could say it's a muted reaction. Now, I want to warn you about this. So this is a five-year chart of the S&P 500. Okay, so it's my belief that in the long run, yes, the stock market is going to continue to go up, especially with President Trump's new Fed chair coming into power in two and a half months. Now, my concern is that the stock market is pricing in a quick de-escalation of the situation. And is that possible? Well, of course, yeah, anything's possible, right? But the situation is just, as you probably see for yourself, it's just escalating. Okay, now why is this a problem for financial markets? It's because, I'd say the biggest one is the price of oil and the concern of heightened recession risk, or you can say stagflationary risk as well. So the Strait of Hormuz has become a danger zone. 20 million barrels of oil passes through there every single day. And global production is about 100 million barrels a day. So 20 million, I mean, that's a significant amount. And I'll tell you this, there's still oil shipments going through the Straits. So you can check the satellite imaging, but that's actually mostly Iran's going to China. Iran's oil exporting, it's not yet been significantly diminished, but that's because US and Israeli forces, they've been prioritizing the striking of military capabilities, offensive and defensive. So as they're going down that priority chain, I'm sure that their energy sector is going to be hit sooner or later. And listen, just to get ahead of the comments, I understand that civilian sites have been struck, and obviously I don't support civilians getting struck, but we're just keeping this financial. And relatively speaking, a smaller quantity of vessels have been struck, but that's not the problem. It's not a matter of, oh, like just a few vessels have been struck. No, the problem, believe it or not, is the insurance on the oil vessels. If the insurers pull coverage and the shipping company is not going to risk it and go through there without coverage, I mean, these are not cheap vehicles that we're talking about. So I'll just, I mean, I'll give you an analogy. Did you know that if you buy a sports car, let's just say a Lamborghini, and you want to take it to the racetrack, then you need special insurance to do so. And no insurance company is going to give you the insurance if they find out that on that racetrack, there are explosive drones that are going to be chasing after you. So obviously, in that type of situation, the racetrack is essentially going to be considered closed for business. And that's what's happening in the Strait of Hormuz. Now, the problem is that if oil prices continue going higher, then that's going to be bad for corporate margins and also for corporate profits. And if there's going to be demand destruction, then supply chains are going to stall, which is going to increase the risk of recession. So if there's no quick de-escalation, then recession risk rises, which could weigh on the stock markets. Additionally, if the price of oil rises, then inflation is going to go up, and then the odds of an interest rate cut will decrease. Okay, the next Federal Reserve FOMC meeting is going to take place on March 18th. And currently, according to the CME FedWatch tool, there's a 97.4% chance that the Federal Reserve does not cut interest rates at that meeting. Now, if the price of oil and gasoline goes up, and inflation as well, wouldn't that be bad for President Trump and the Republicans for the midterm elections? And the answer is yes. Okay, so why would President Trump put himself in this situation? And from, okay, so from my point of view, President Trump is going to have an excuse. He's just going to say, you know, rising oil, gasoline prices, inflation, or stagflationary environment. He's just going to blame it on Iran. So listen, I'm just trying to tie this all together for you so that it makes sense to you. But tell me that that's not what's going to happen. Now, when we take a look at the US dollar, the dollar experienced a flight to safety today, making it stronger. And this led to downward pressure on metals, gold, silver, copper. So silver was starting to rally again, but it took a hit today. Now, if the dollar weakens, which I expected to do, then it's going to be good for silver. This is a 24 hour chart of gold. Gold is another flight to safety, which is why it's up today. However, because the dollar strengthened, it erased most of today's spike in gold. However, I want you to see this. So this is a one-year chart of gold. And I'm telling you that all of these geopolitical events, they're just going to further encourage de-dollarization from China, from BRICS, and European countries as well. Poland is actually going nuts, buying tons of gold, literally. And I just want you to take a look at this chart. It is looking very healthy, and I expect further gains in gold. And listen, I already told everyone before that, well, at least on my Patreon site, that gold mining stocks would be good picks. And here's why. I highlighted three sections in red boxes. And the first one is the price of gold in Q3 of 2025. And then the next box is gold prices in Q4 of 2025. And look at how gold prices have been so far in Q1 of 2026. So obviously, gold mining companies are going to show better performance in Q1 of 2026, which we're currently in, compared to Q4 of 2025. I mean, look at the price of gold. How likely is it that their revenue and profits are going to decrease year over year or quarter over quarter? Just look at the chart. I mean, it's a dead giveaway. Now, what's really interesting is that the dollar reacted by strengthening. But U.S. Treasuries did not. As a matter of fact, the yield on the 30-year Treasury bond went up. So that's not a good sign for the stock market, which makes the situation even stranger. So it's most likely the bond market reacting to higher oil prices, pricing in a higher chance of a stagflationary environment. And it's not just the 30-year bonds. It's a 10-year notes as well. There was no flight into safety for U.S. Treasuries. The 10-year yield is up as well. So my sentiment is that I do not think that we have an all-clear sign to rush into the stock markets. Personally, I wouldn't be surprised if we suffered a dip. I would take advantage of the dip if it happens. However, I would still dollar cost average in. So it's just that the stock market reaction is not aligning with the increased recession risk and the bond market's reaction. So my warning is to be cautious here with an entry into the stock market or adding to positions. And again, it appears that the market is pricing in a quick conclusion like the Venezuela situation, even though that situation is still not yet resolved. So I would say what's being priced in is a quick de-escalation. However, President Trump even said that the Iran situation could take four weeks or even longer. And that is a lot of time for major volatility, especially in a news-driven environment and news-driven markets. And I just want to pose the question, how likely is it that there's going to be de-escalation when U.S. and Israeli strikes? They've killed top officials and their supreme leader. Additionally, Iran has retaliated by attacking U.S. bases, Israel, Bahrain, Qatar, UAE, Kuwait, Iraq, Jordan, and more. So that just sounds like more reason for escalation, not for de-escalation. At least that's my opinion. And I don't know how we're going to have a truce or become friends after that, especially after President Trump swore to avenge the deaths of U.S. service members. And I believe that this is going to last for the entirety of March because I believe that the U.S. is most likely going for regime change. 3,000 sites have been hit in Iran. And this includes police stations so that protesters will face less resistance. But listen, I think it's a given that we're going to see heightened volatility. But I just want to say that even if the market goes down, I believe that the best course of action is to not panic sell. If you want to know what I'm doing with my investments, stocks, gold, silver, check out my Patreon sites. I'm going to leave a link for you down below. 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