Is the Iranian Conflict Impactful to Markets?
175: The Weekly Selection
Hello all and welcome back to The Weekly Selection, where I cover my thoughts on the market, where we’ve been, and where we’re headed. Below I have attached my core themes for this upcoming year, as well as some of my principles for the new follows:
→ AI In healthcare will grow Exponentially (diagnostics, treatment, breakthroughs)
→ Huge IPOs will drive speculation into underappreciated markets (Drones especially)
→ The grid needs bolstering (Power generation and transmission equipment)
→ Elon Musk is going to Mars (long space exploration and related groups)
The latest article can be found here:
Overview
We are well into 2026 now, and I think it goes without saying that Trump is keeping his promise of delivering an exciting second term to conclude his time as president. Over the weekend, it was announced that a conflict has arisen between the U.S and Iran, and I have broken it down simply for the uninformed below:
Saturday Morning: The U.S. and Israel launch joint strikes against Iranian nuclear sites, missile facilities, air defenses and bases in and around Tehran
Saturday Afternoon: It is reported that that Iran’s Supreme Leader of 50 years Ayatollah Khamenai has died. Trump encourages Iranians to stand up and overthrow the remaining government.
Saturday Afternoon: Iran launches retaliatory missile and drone strikes on US bases, no US casualties reported.
Sunday: Israel continues strikes on Iranian infrastructure, US reports 3 casualties, Iran scrambles new leadership, the world watches, in fear and awe.
A strange feeling of being as active in the markets as I am is that news is delivered to me as a measure of value it holds in moving markets, not in its emotional or thought weight in my head. I often question whether or not I think the leadership in this country is making the right choices, and what I would do differently, but ultimately I always come to the conclusion that emotional decisions are costly, and making rash choices based on my own beliefs in my portfolio is a surefire way to underperform.
For long time followers of this publication, you know by now that when it comes to politics or related topics, I tend to shy away from providing what I think, and instead base my thoughts on what’s best for my portfolio. Know this as we get into this weeks article.
Iran Opinions
First things first, we must learn Iran’s impact on the world to best understand how markets will be impacted by war in the region. As far as I see it, here are the metrics that matter:
Iran is the 6th largest oil producer on the planet, producing 4% of the worlds supply, 40% of which goes to China. 30 years ago I think this conflict holds a lot more weight, but these days with the U.S. carrying the burden of Oil production for the world, I don’t see Iran as much of a threat here.
Iran has control over the Strait of Hormuz, a waterway in which 20% of the worlds oil and gas flows. This is an important body of water, however without a strong navy, it is very difficult to “close” in the event Iran decided to do so. We must also remember that the U.S. has just taken out swaths of Iranian military leadership, lessening the likelihood of a closure in the Persian Gulf.
The United States and Israel are in their strongest relationship in history. The direction the U.S is taking in supporting Israel and Jewish efforts against states of Islam is something that we have not seen with such military might before. I think this relationship is one that is acting with swift precision as opposed to blind activation, like we saw in the early 2000s, which may lead to more prominent victories in the region.
Now that we have summed up the crucial points here, how does this impact markets? In the short term, expect volatility, as we know that headline mania is a potent pill for stocks to swallow when it comes to Trump’s war actions. I would anticipate Oil has some kind of gap up then sells off as everyone realizes that Iran really isn’t that impactful to global oil flows, especially the ones listed on US exchanges. If Iran does attempt to block the strait of Hormuz we have recently reallocated our naval efforts to the middle east rendering that effort useless if true. Conversely to oil, It’s possible that stocks see a small sell off then continuation higher, as we have seen through years of headlines like that of this weekend. Taking a look at some of the indexes heading into the week, see below:
SPY is below all the SMAs, rangebound since October, and generally pretty dormant lately. I could see the index retesting the low of the range, but if it holds there amidst the chaos, a pretty strong bull case can be made. AKA, if this doesn’t take it lower, what will?
VYM, the value index is setup beautifully into the week. 2 of its top 10 holdings are Oil related, so its seem probable that this sees a gap up if Oil moves, in addition to the potential flight to safety in US equities (value).
As for prominent growth names, I think we can expect volatility. The key is to just stick to the rules from before the news broke and act accordingly. I am not going to get stopped out of a position I’ve held for weeks or monthly solely because of a headline I think may have longstanding impacts on my portfolio.
I originally had a bunch of stocks on this weeks selection to note, but with the news uncertainty I am opting instead to release an article tomorrow or the day after when we shakeout. You all know by now that my portfolio is 100% long anyway, and I have had no reason to sell.
Good luck this week, and remain level headed amidst the turmoil.
