Tariffs aren’t the only bearish signal on investors’ minds. Now they have to worry about a brewing war in the Middle East as well. The S&P 500 dropped 0.84% on Tuesday as reports emerged that President Trump was deciding whether to order military action against Iran as Israel wages a campaign to neutralize the country’s nuclear capabilities. Stocks fell across the board, though oil companies saw an increase as investors anticipated higher prices.
While Trump’s second term in office has been marked by volatility, much of the market chaos was spurred by his aggressive tariff strategy, rather than geopolitical strife. That could change as Trump weighs whether to deploy U.S. forces to the mounting conflict in Iran—an action that he previously opposed.
While a broader war could hurt sectors from tech to retail by disrupting supply chains, the energy sector could rally as Israel targets Iran’s oil and gas infrastructure. Oil prices have risen around 15% over the past five days.
Still, he cautioned, anything from a stray bomb to Iran deciding to block the Strait of Hormuz could dramatically impact the world’s oil supply. That could mean higher gas prices and myriad downstream effects for a wide array of industries.
“Right now, it looks like an inconvenience with a potentially temporary price spike. It could become much worse, so pay attention and cross your fingers it doesn’t escalate,” Pickering said.
