The Week Ahead (16-20 Mar): Iran War, energy prices & interest rates
Welcome back to The Week Ahead. After a turbulent week in markets and geopolitics, I suspect there is a good chance that anything I write here will be outdated by the start of next week.
As things stand, the stock market reaction so far has been relatively modest. With the FTSE 100 down by 5% since the US launched its attack on Iran, we are certainly nowhere near a crash:
*Market close on 12/03/26
While a 5% drop in two weeks may feel slightly uncomfortable, it’s probably worth remembering that the FTSE 100 is still up by nearly 20% on a one-year view at the time of writing, as is the S&P 500. European indices have fared a little worse:
Another indicator highlighting the relatively muted stock market reaction so far is the VIX volatility index, which reflects US market conditions. Although volatility has risen since the end of February, it remains well below the levels seen during last April’s tariff tantrum:
Energy winners vs losers?
One reason for the recent underperformance of the UK and European indices may be that these regions are seen as likely to be greater net losers than the US as a result of soaring energy prices.
While US consumers are also suffering higher energy costs, the US is the world’s largest oil producer and is a net exporter of oil and gas. As a result, its large energy sector stands to enjoy bumper profits from elevated prices.
Oil & Gas
Mark commented last week that the only thing that goes up in a crisis is correlation between assets – i.e. they all fall together.
In this case we’ve seen sharp rises in energy prices, but in keeping with Mark’s adage oil and natural gas have started moving in lockstep since attacks on Iran started on 28 February. I guess this reflects the disruption to the shipment of both commodities from Gulf countries:
As yet though, both oil and gas prices remain lower than during the first year of the Ukraine war:
Unfortunately for many businesses and consumers, recent news suggests we may have to adjust to higher energy prices for some time to come.
On Thursday Iran’s new supreme leader Mojtaba Khamenei made his first statement since succeeding his father. He called for the Strait of Hormuz to remain closed and threatened action on new fronts if the war persists.
Oil prices responded by gaining nearly 10% on the day. Even before Khamenei’s statement, the International Energy Agency had said that the Iran war is causing the “largest disruption in history” to oil supplies.
According to the IEA, Gulf oil producers have cut their output by a collective 10m barrels per day due to the near-shutdown of shipping through the Strait of Hormuz. That’s roughly equivalent to the entire oil output of Saudi Arabia or Russia – or around 75% of US daily oil production.
Even if the conflict were to stop tomorrow, recovering from such significant disruption would be likely to take some time.
Watch out for interest rate decisions
Energy-intensive industries are likely to suffer from high oil and gas prices. But it’s starting to look like the fallout could be much broader than this.
Interest rates are one area of focus. The likelihood of persistent inflation due to high energy prices means that expectations for central bank rate cuts are being dialled back.
Next week sees interest rate decisions from the Federal Reserve, European Central Bank and the Bank of England.
While it's probably too soon for these banks’ decision-making committees to consider raising rates, commentary from rate setters may signal a change of tone is likely if the conflict persists.
Yields on UK government bonds have already risen sharply since the start of the war, potentially putting more pressure on government borrowing forecasts:
After two years of gradual declines, UK mortgage rates have also started to rise to reflect volatility and the changing outlook:
Many lenders have withdrawn fixed-rate deals in recent days, as market volatility has made it difficult to secure the interest rate swaps that underpin such deals.
Soaring energy prices mean there’s a risk inflation will prove stickier than expected. In turn, this could prompt central banks to pause any further interest rate cuts and potentially even lift rates.
If these conditions persist, any hoped-for recovery in housebuilding could be pushed back another year as the viability and affordability of new developments come under renewed pressure.
More broadly, any increase in borrowing costs at a governmental or consumer level could dampen already tepid economic growth in the UK and Europe.
Interest rate decisions aside, economic news is relatively limited next week and almost certain to remain overshadowed by geopolitical events.
Company news
After a quiet start to the week on Monday, earnings season continues here in the UK next week, with a large number of results from small and mid-cap companies.
There are very few big caps on the earnings calendar next week, however, so the UK market seems likely to remain driven by external events rather than corporate news.
US corporate news is also expected to be quiet next week, again suggesting focus will remain on geopolitics.
I hope you enjoy the weekend!
Here’s a summary of what’s expected next week.
Economic Calendar
| Date / Time (BST) | Country | Event |
|---|---|---|
16 March | ||
02:00 | China | Industrial Production & Retail Sales |
12:30 | US | Retail Sales |
13:15 | US | Industrial Production |
17 March | ||
03:30 | Australia | Interest Rate decision |
10:00 | Germany | ZEW Economic Sentiment Index |
12:30 | US | Building Permits |
12:30 | US | Housing Starts |
20:30 | US | API Crude Oil Stock Change |
18 March | ||
10:00 | EU | Inflation |
12:30 | US | Producer Price Index |
14:30 | US | EIA Crude Oil & Gasoline Stocks Change |
18:00 | US | Federal Reserve Interest Rate decision |
19 March | ||
07:00 | UK | Unemployment Rate |
12:00 | UK | BoE Interest Rate decision |
12:30 | US | Initial Jobless Claims |
13:15 | EU | ECB Interest Rate Decision |
14:00 | US | New Home Sales |
20 March | ||
17:00 | US | Baker Hughes Oil Rig Count |
Companies Reporting
| Date | UK Trading Updates and AGMS | UK Financial Results | International Financial Results |
|---|---|---|---|
Monday 16 Mar | Marshalls (LON:MSLH) Sigmaroc (LON:SRC) Standard Life (LON:SDLF) | Dollar Tree (NSQ:DLTR) | |
Tuesday 17 Mar | Abingdon Health (LON:ABDX) Ashtead Technology Holdings (LON:AT.) Boku (LON:BOKU) Close Brothers (LON:CBG) Eagle Eye Solutions (LON:EYE) Essentra (LON:ESNT) Fintel (LON:FNTL) Goldplat (LON:GDP) Harworth (LON:HWG) Midwich (LON:MIDW) Mortgage Advice Bureau (Holdings) (LON:MAB1) Pebble (LON:PEBB) Property Franchise (LON:TPFG) Science (LON:SAG) Shearwater (LON:SWG) STV (LON:STVG) Travis Perkins (LON:TPK) Trustpilot (LON:TRST) Wickes (LON:WIX) Yu (LON:YU.). Zotefoams (LON:ZTF) | Lululemon Athletica (NSQ:LULU) Docusign (NSQ:DOCU) | |
Wednesday 18 Mar | Moonpig (LON:MOON) Safestore Holdings (LON:SAFE) | Advanced Medical Solutions (LON:AMS) Beeks Financial Cloud (LON:BKS) FDM (Holdings) (LON:FDM) Gem Diamonds (LON:GEMD) Genel Energy (LON:GENL) Nexteq (LON:NXQ) Prudential (LON:PRU) Softcat (LON:SCT) Trufin (LON:TRU) | Tencent Holdings (HKG:700) Micron Technology (NSQ:MU) General Mills (NYQ:GIS) Macys (NYQ:M) |
Thursday 19 Mar | LBG Media (LON:LBG) Smarter Web (LON:SWC) Titon Holdings (LON:TON) Various Eateries (LON:VARE) | Atalaya Mining Copper SA (LON:ATYM) Central Asia Metals (LON:CAML) DFS Furniture (LON:DFS) Energean (LON:ENOG) Eurocell (LON:ECEL) Gulf Keystone Petroleum (LON:GKP) IG group (LON:IGG) InvestAcc (LON:INAC) | Enel SpA (BIT:ENEL) FedEx (NYQ:FDX) Vonovia SE (ETR:VNA) Darden Restaurants (NYQ:DRI) |
Friday 20 Mar | J D Wetherspoon (LON:JDW) Smiths (LON:SMIN) | Meituan (HKG:3690) Carnival (LON:CCL |
Disclaimer
This is not financial advice. Our content is intended to be used and must be used for information and education purposes only. Please read our disclaimer and terms and conditions to understand our obligations.
30 comments
Oman is staying that the damage to its LNG infrastructure will take 3-5 years to restore. Given it supplies 20% of world LNG with a strong bias towards Aisa surely long term this is going to accelerate a shift towards alternative energy sources. It's also (sadly) going to play into Putin's hands.
Gulf Keystone Petroleum (LON:GKP) have shut in production at the start of the current hostilities. They won't be benefitting much from that! I hold.
Gulf Keystone petroleum
Full year results for GKP is due 19 March.
The company is located in Kurdistan, Northern Iraq and exports its oil through a pipeline to the Mediterranean port of Ceyhan. So it is a beneficiary of the closure of Hormuz and the high oil price.
It is a very low cost producer , each barrel of oil costs $5-7. It is however at risk of Iranian retaliation against the US and the Kurdistan authorities.
On the balance of probability I am going to gamble on the upside!
Central Asia Metals (LON:CAML) also in a current bad land. Way oversold in my view - but need to wait till the cannon fire stops to see where Mr Market takes a stand.
Gold and Silver - consolidating in my opinion.
Socialism upwards in my view - big bad for the future.
Look up Dilbert. Scott Adams. Have some humour and fun before our DUH overlords mess it all up - red or blue no matter.
My feeling is that we could see the indexes walk down day-by as the fog of war does not end as soon as we were lead to believe. I have sold 40% of my portfolio and am looking to sell more rather than buying back in any time soon. Dealing costs and spreads are a concern and I hate selling but you gota do what you gota do!
There are loads of people doing interviews that outline what is going on. Most of them Americans who had top jobs in the past as well as others who are experts. You could argue that what all of them are saying is fake and won’t happen, but the reality is you can not trust a word Trump says. He repeatedly lies and can not be trusted. So you have to ask yourself who you really believe. IMO, the American empire is dying and is being quickened by Trump. The sad thing I see is similar mistakes are being made as before WW2. Politicians are still fighting amongst themselves. Countries are unprepared. I feel we in the UK are aligned with the wrong sides. The whole situation is a complete mess. Then there is China. What are they doing? Playing the long game and for years been planing. They don’t even need to do anything atm. Just wait and watch as America destroys itself. It doesn’t mean it’s easy for investors to decide what to do. For so long the best strategy has been to hold and wait. Buy the dips. I do hope I am wrong but I feel like in the coming years we are going to be in a whole lot of pain and most people just do not see it coming. As for Iran, they also have been planing being attacked for years and have set out a plan which seems to be going to plan. They know they can not defeat America on a conventional level. But know that they can defeat them by out lasting them and crippling them economically. They have been producing missiles for 20 years and have them hidden deep underground. America is nearly out of missiles, missiles that are not easily replaced. Hence why America has pulled Thad from S Korea which has really pissed off the S Koreans. The troops they are taking there are being pulled from Japan, which has pissed off the Japanese. If they do try to land these troops they will be sitting ducks. So many countries are now turning on America and just don’t trust them.
Israel have hinted of using nuclear bomb. Iran will likely have a nuclear bomb within weeks. Iran have attacked back on similar scale. What US targets, Iran then hits back the equivalent. The day America removed its thad defense system from S Korea, North Korea does a Ballistic missile test.
Still, I live in hope it all ends tomorrow and everyone can sit down to a nice cup of tea.
Praying for that gm for sure this is the problem with war mongering same will happen in Europe the only way to keep Putin out will be for more countries to get nukes sadly.
It will be interesting to see what effect (if any) the recent press comment has on the Vistry stock price.
The FT reports that a number of analysts have raised questions over the financial position of the company and "it's ability to operate within the limits of its 1.1 billion banking facilites."
The FT also cites reports (Bloomberg) that the company has sold properties at a discount to a private equity firm.
From its side, Vistry argues that it is a capital light model. The FT also reports that on March 12, Fitzgerald bought more than 200,000 shares in the company worth about £900,000.
No Position.
Well the press comment is becoming more concerning.
Sunday Times Business section today.
"Hard-up housing giant halts supplier payments"
Apparently questions have been asked in Parliament abot the level of Government support offered to Vistry to build affordable (subsidised) housing.
There were also Newspaper reports a while ago that Vistry was discounting some sales built under its Bovis Brand. I found this difficult to believe as Housebuilders usually do anything to avoid a situation which looks like a direct discount.
I doubt that Vistry will fail as it is too important to the Government housebuilding program.
Trading update in Goodwin (LON:GDWN) expected this week! They’re are also x/d 140p on 19th.
BKS - Half year results 16th , presentation 18th March 2026.
This is the beginning of a very long painful journey. Looking at my workings I am predicting a return to 2008 levels.
Purely basing this on the logistical chokehold which has being created with the Straight of Hormuz being “selectively” closed. At the beginning of the week when the Asian refineries were running dry, oil should have been double then the paper price… reverse engineering the price of oil from the price of jet fuel at current operating margins for the refineries, we were looking at $200+ a barrel.
Shipping fuel offered a slightly better picture when reverse engineered it came to $150-180, yet have we seen close to these prices on paper?
Granted it was local demand and scarcity but the market is currently being arrogant with the impact of this war… don’t believe me, compare the price of dated Brent (physical oil) and the futures price (paper oil).
100% agree ... I just spent 2 days at a military charity conference and l everyone I spoke to thinks this looks like an Iraq squared in the making. Meanwhile the futures curve is totally sanguine and even positively chilled.
This situation is a really hard one to call imo.
On the one hand, there are so many negatives. Inflation has gone up while GDP has fallen, Stagflation. While we are not as dependant these days on oil for energy as back in the 1970s, when Oil was stopped in a similar situation with Iran, Europe and even more so, the UK, have let reserves dwindle through the years and we are today using even more energy. Gas is a major problem too today. To make things worse, we have slowly, as a nation, become less self sufficient, and rely on imports for nearly everything.
Food is a real worry, as we do not produce enough in this country any more. If a true World War does happen, imports of food would decline. Even without a World war, there could be a decline in food due to shortage of fertilizer from another large commodity, Urea, that comes through the Straits.
Relying on the US is not an option these days, as they will do what is right for them first, as they always have. They can not be relied on. It pissed me off when Trump said we wanted to join the war after they had already won it. Just look back at the world wars and to when the US joined in. They joined it late and refused to join in until they got attacked! I do not agree with the Regime in Iran, but I also do not agree with the War.
Anyway, If Iran does not play ball and the straits remain closed, it's possible we could be in a similar situation to the 70's where interest rates spike to 15%. It is that serious.
Then we have huge debt that is unsustainable. An AI bubble. Deglobalisation. Gold spiking. Rare earth shortage.
Then, when looking at the indices, they have had a good run, hitting all time highs, time after time and now look like they have hit the top and are due a correction. The FTSE has been in an upward channel on a weekly chart for years and has recently hit (or came close) the top of the channel. The S&P is similar, and has been forming a curved top, (an indication that Institution's are selling) suggesting a reversal is on the way and now has broken a major support.
On the other hand, History tells us, that when wars breaks out, Oil always spikes, then comes back down several months later. Indices initially dip 5-6% in the first few weeks and then a bull run begins, making buying on the dip a very good move.
It looks to me like we have had the 5-6% dip and investors are now waiting on any news that the war is over, or the straits will open up, so that it may continue to rise.
The Fear Greed index is down to to extreme Fear, but the rating is not overly low at 20.
Whether History is right or we are about to see a long awaited crash again is anyone's guess and quite frankly, out of our hands.
Some snippets of news:
Russia, freshly unsanctioned, raised its crude prices to India overnight. $50 → $95 per barrel. No more discounts. Araghchi said:: “The US spent months bullying India into ending Russian oil imports. After two weeks of war, the White House is now begging the world - including India - to buy Russian crude”. Well, quite ...
"We have already destroyed 100% of Iran’s Military capability” D. Trump. Righto, so no concerns or acknowledgement of the Iranians hitting Al Dhafra in the UAE, or Tel Nof taking ballistic‑missile strikes, and Hezbollah rockets arriving on a steady half‑hour rhythm, or that Eilat was being showered with cluster submunitions. "No Sir, we got these guys beat". Of course you have. Is that why 82 airborne are preparing to enter theatre and why 5,000 marines are already on their way. Be interesting to see how this plays out during the mid terms ... probably little impact: have you ever seen what passes for American news? I don't think the average American voter is informed much beyond Facebook and Fox News. They believe what the tech bros and Rupert Murdoch decide, so don't hold your breath.
Almost unbelievably Trump has asked the Chinese to send warships to help escort oil tankers and other ships through the Strait. However, China already has at least one warship there. The Liaowang-1 intelligence vessel, sailing near Oman, sharing real-time targeting data with Tehran. The Russians and the Chinese are actively sharing targeting data with the Iranians and Trump asks them for help.
China’s tankers already transit freely and have done so since day one. Iran’s FM Araghchi confirmed the Strait is “not closed” but exclusively permits transit for Indian and Chinese ships and signals willingness to allow passage if oil is settled in Chinese yuan through CIPS.
I would have loved to see the war game outcome on the Chinese dimension. ... I mean the Americans did war game this and make a plan, right? A retired senior NATO intelligence man told me on Friday, the problem is both the quality of advice Trump receives which is filtered through a political pro-Israel and pro-Putin prism and the ability of Trump to actually process it.
A sixth KC‑135 has now gone down in Iraq, with all six crew lost. That brings the tally to seven U.S. aerial refuelling aircraft degraded in a 48‑hour window—a direct strike on the circulatory system of the air campaign.
Iranian drones have struck the Port of Fujairah; the world’s third‑largest oil storage and bunkering hub; forcing a suspension of loading operations. This was the principal bypass route for avoiding the Strait of Hormuz. Coupled with the U.S. strike on Kharg Island, both sides are now deliberately targeting energy infrastructure.
Anybody fancy a small bet with me that the Iranians take out the Saudi pipeline running from Saudi Arabia’s major east‑coast processing hubs at Abqaiq and the Ras Tanura area, crossing the Arabian Peninsula westward before terminating at Yanbu on the Red Sea. This pipeline is the kingdom’s only major export terminal outside the Persian Gulf and it was built as the primary bypass for the Strait of Hormuz to ensure export continuity during any disruption to Gulf chokepoints. It has to be a prime drone target.
Silver market COMEX: Shanghai Deja Vu: WTI is trading around $98–100, while Dubai physical crude swaps are near $138, leaving a roughly $38 premium for physical barrels. Futures briefly spiked to $105 over the weekend. As Goldman’s Jeff Currie put it, there is effectively no policy lever capable of halting this move. Even a maximum‑rate SPR release of about 2 million barrels per day offsets barely 7.5% of the more than 17 million barrels per day currently offline. Apparently, the Trump regime are now talking about trading in the futures market to try and control the oil price. This seems to me to be an admission of failure - I think the Trump regime thought the Twelver Shia regime would collapse on the first onslaught. Instead they are now faced with negotiating with Mojtaba Khamenei, son of the late Ayatollah Ali Khamenei, who is even more extreme than his father, has combat experience and, as a Husayni Sayyid, claims a direct lineage from the Prophet Muhammad. Not only that, the Americans murdered his wife, his son, his brother and his father and another four members of his families. Does that sound like a guy ready to negotiate with you?
Not only oil transits the Strait of Hormuz: 50% of global urea exports originate from countries west of the Strait and transit Hormuz; 50% of global sulphur exports also originate west of the Strait and must pass through Hormuz; and, Gulf producers account for 23% of global ammonia trade produced by the Haber Process, with 18.5 million tons of urea exported through Hormuz in 2024.
So don't think:
You might think I am something of a pessimist ... you would be right. Don't think I am an apologist for the Iranian regime: I am not and I have friends in Israel and in the Iranian diaspora in Germany. They are as delighted as I am concerned. I tell myself, I must disentangle my distaste for the Trump regime from the undoubted prize of removing the murderous Iranian regime. However, no regime has ever - not once - been removed with an air campaign and this time will prove no different. Somehow we must all manage our family money through this turmoil - I just believe there are many who believe we are closer to the end of this than the start: whereas I believe this is epochal and the impact on markets could be catastrophic. Afterall, economies are nothing but energy transformed. Those of us who once wore a uniform, will understand my respect for The Plan. What plan? Here, there is no plan; there is no end game or clear exit strategy. Most Iranians and Israelis I talk to fear TACO - Trump declares victory, walking away to leave others to clear up his mess. That is General Sir Richard Shirreff's view and is the prevalent view among the folk I spoke to recently. Meanwhile, the investment community remains remarkably sanguine and relaxed. I wish I was.
Have a nice week.
Alastair
I'm beginning to fear your right, I went to a meeting with a large fund house last Fri and their head of equities said market still pricing this to be over by the end of easter. What a mess and sadly predictable re the pro Russia element I take that comes from the Gabbard woman ?
It will be over by the end of Easter so far as America goes because they will have run out of ordnance and missiles. I was told last week, they have between 2 and 3 weeks left at current rates of fire whereas the Iranians have between 16,000 and 20,000 low tech drones scattered far and wide over a country twice the size of Iraq and much more mountainous; more akin to the Afghanistan Hindu Kush. Those nice Chinese are not going to supply any more REMs for missile guidance systems being used to take out Chinese oil supply, not matter what the genius Trump regime thinks.
The Iranians can pop off a few drones against strategic targets in the Gulf at their pleasure and unless the Americans put boots on the ground, there is nothing they can do. (Besides, I think the Iranians would love to see American boots on the ground)
I also heard something else very disturbing. Apparently Iranian radio stations have started transmitting strings of numbers across the US and Europe and nobody knows what they mean. I cannot help wondering if they are communicating via an old fashioned key pad with sleeper cells. If so, who knows what we may face in the next few weeks. We are very very vulnerable - water, power, food distribution - I think from memory there are 9 RDCs supplying the Tesco network for example. It would not take much to knockout 20% of the UK's food supply chain.
The problem is investors think linearly and not asymmetrically. We face an enemy who is expert at thinking asymmetrically. We simply do not live in a world governed by y=mx +c.
Cash, Norwegian and UK oil equities, gold and a small position in Vix. I also recently bought Norwegian fertiliser company, Yara International ASA (STO:YARO) which is up 20% since I opened a position. Norsk Hydro ASA (STO:NHYO) or Norsk Hydro ASA (LON:0Q11) also looks interesting although I was not aware much aluminium went through The Strait.
James, how do you account for the present poor performance of gold? I was expecting the price to hold up amid the present uncertainty.
IMO and I could well be wrong, there are several reasons for golds poor performance.
First, it’s had a good run in the last year and the price is high. So many would be taking profit and moving funds into Energy stocks. Secondly, the increase in oil will increase the mining companies profit levels, albeit not a huge difference percentage wise considering how much profit they are making now. And thirdly, when indices drop, all equities drop. Gold tends to then rebound sooner though.
Many investors will be going to cash and waiting to see what will happen.
It is not investors driving this.
Hi John
In answer to your question, in my opinion, there are several reason for Gold's response to the US attack on Iran:
1. Rise in the DXY
2. The market had already priced in an attack on Iran and consequently
3. The market reckons this is contained and will not escalate (the market is so wrong in my view)
4. Some leveraged traders needed to sell something for liquidity to cover losses in the O&G markets ... gold always always gets sold first, Check the history over the past 100 years. I am hearing of losses in the order of USD 300 to 500 million for some traders. You cannot trade this level of volatility in a market that has been so corrupted by Trump ... I will post the evidence below.
5. CTA algo programmes just follow a well worn path.
I am not a trader - My family has held physical gold in Switzerland for longer than I have been alive and I personally continue to hold about 20% in the Royal Mint ETC - The Royal Mint Physical Gold ETC Securities (LON:RMAP) .
You can never be too sure of anything in life, but I am pretty confident Gold is going much higher and Trump's illegal war of choice is going to shit.
If you have gold hang on; if it dips buy more which is what I am doing.
Corruption:
Absolutely "the art of the deal" or call it what is really is - corruption on a massive scale.
Trump’s “the war is very complete” remark hit the tape at 3:20 p.m. ET - eighty minutes before the close and after the worst trading session of the year. Markets whipsawed instantly: roughly $2 trillion was added to S&P market cap in minutes, and deep out‑of‑the‑money SPY 675 calls exploded from two cents to $4.95. The move mirrored the “conditional de‑escalation” phase outlined in the Kobeissi playbook published on March 3. Within hours, Iran escalated again, crude snapped back toward $91, and Trump followed with his “20x harder” message. The 3:20 p.m. surge and collapse is now a major point of discussion across trading desks.
You decide ... many of us already have. It is so brazen, some traders have developed strategies to trade the Trump corruption.
Thank you James it’s really valuable for an amateur investor such as myself to gain insight into how professional traders operate. I have to say I agree with you that this is going to spin out of Trump’s control and lead to a deep disruption of the global economy.
John ... I am just an amateur as well. Trust me, I make many mistakes and when I do, I freely fess up. The market humbles us all.
James, thanks for your comments here and on other threads, they are always good to read.
I think the market is starting to catch up with your sentiment today, FTSE100 down 2-3%. I wonder what Trump's next pronouncement is going to be...
Personally Tim I think the old boy is in full on destructive mode and will keep doubling down on his current course, its had a bit of a covid feel about markets if you remember it took from memory a week after covid started hitting the news before everything fell off a cliff.
It seems to have taken a while longer this time round and if it comes to pass again I think everything bar oil/gas and money market will get a mauling , short dated bonds will also be hit but not as bad as 2022 as rates at least on them aren't now near zero so even if rates do go up it shouldn't be hopefully to the same extent as 2022.
A fair summary. Long energy, long fertilisers, long cash, long VIX, short European and the Japanese market which are hugely negatively impacted by this.
Back in the day we used to present our analysis with a percentage probability (which at the time, I thought was a bit of a joke really - I mean how do you decide if you are 65% sure or 75% sure?). So with that firmly in mind and tongue in cheek, I predict with an 80% probability Trump will put boots on the ground to secure Kharg Island. It is Iran’s primary deep‑water oil terminal and handles roughly 85–95% of all Iranian crude exports, or 7 million barrels per day. 5,000 marines and the 82 airborne are on their way and I am pretty sure this is the target.
So in answer to your question, Trump will escalate. He is out of strategic choices and the problem with this 40-year old wet dream of Netanyahu's that Trump is kindly executing with US tax payers money and American lives, is that whilst it is tactically brilliant, it has the strategic depth of a puddle.
Trump thinks he will end this at a time of his choosing: He will not, the Iranians will decide when this ends and I think America will pay a very high price in terms of its relations with European "allies" and the Gulf States. So as well as oil, I would watch gold which is currently being sold by the Gulf States to fund budget deficits and copper which is falling because the market has woken up to the impact USD150 oil is going to have on the global economy. The Iranians will make this a multi-generational fight and take this to American assets and American soil.
I wrote about my predictions for oil here: $150 Oil by April - Alastair Kendall
The other modest little problem the Americans and Israelis have is the enriched Uranium, which by now will be scattered far and wide across a country twice the size of Iraq in gas canisters on the back of Toyota truck. I write about this modest little problem here:
Anyone Got a Plan? - Alastair Kendall
On whether or not Trump will escalate I can recommend you listen to Professor Robert Pape. Robert A. Pape is a leading American political scientist and one of the foremost experts on international security, coercive air power, and terrorism. He teaches at the University of Chicago and directs the Chicago Project on Security and Threats (CPOST). From 1991–1994, he served as a faculty member at the U.S. Air Force’s School of Advanced Airpower Studies, the Air Force’s elite graduate‑level program for developing senior air‑power strategists. He is being interviewed here by Times Radio:
Trump is 'trapped' on Iran. This is what will happen next | Robert Pape - YouTube
America has a long list of strategic war failures stretching back to WW2 and there is no reason to suppose this latest fiasco will be any different:
What are we to do when all my favourite positions - gold, silver, copper - are crashing? Hold tight is the answer - I am not a trader, but things are going to get a lot worse. I was fortunate to hold VIX, some shorts, and invested 10% in European and UK O&G plays. I also bought Norwegian N-fert company, Yara International ASA (STO:YARO). I still hold 10% in cash and wish it was higher. Despite this, overall the portfolio is down - the lesson being you should follow your convictions in a convincingly aggressive manner. I find it astonishing that USVIX is only up from its low of 13.577 to 25.190 now.
It is immensely sad that innocents are losing their lives and we should stay focused on this and not the turmoil in our portfolios.
Alastair
Thank you Roland for your excellent piece of research. The only thing I would add is although as you point out "the stock market reaction so far has been relatively modest. With the FTSE 100 down by 5% since the US launched its attack on Iran, we are certainly nowhere near a crash:" That is quite right. I think also as the news is fluid its worth remembering that it can change quickly one way or another. During the Trump Tarriff announcements in 2025 it went down around 12%. During 2020 it dropped over 30%! and took around 2 years to recover to previous highs. A 5% indices drop can often potentially mean a lot more in individual stocks. In reality with the uncertainty we have at the moment its really hard to call the direction or potential severity. Thanks again