Wall Street opened this morning with a grim sigh. The Dow futures fell by 1%, the Nasdaq by 1.1%, and the S&P 500 by 0.9%. This was not simply another tremor of inflation anxiety or quarterly earnings blues. No, it was the familiar thunder of distant bombs - Israel's strike on Iran's nuclear infrastructure - reverberating through the most delicate corridors of global finance.
War has always been good for some business. The defense sector gleefully ticked upward: Lockheed Martin, RTX, Northrop Grumman. Meanwhile, the airlines bled, crude soared 9%, and risk - once again - was rebranded as realism.
We are witnessing the fragility of markets in a world ruled by reaction. That the VIX, Wall Street's so-called “fear gauge,” hit a three-week high should surprise no one. Investors now dance not to the rhythm of economics but the drumbeat of geopolitical chaos.
The irony is profound. Even as indices fall, the S&P 500 remains just 1.8% off its all-time high. The illusion of resilience masks the reality of a system addicted to volatility, where every conflict is a buying opportunity, and every peace talk, a profit delay.
Overnight, the Jewish state struck several sites linked to Tehran's nuclear programme, while eliminating five major figures, two scientists and three of the country's most senior military officials. The air strike was reportedly followed by targeted operations carried out by infiltrated teams.
On the markets, oil prices skyrocketed. Brent crude rose by up to 11%, the sharpest rise in three years. The barrel soared above USD 75, up 7.5% (I would like to take this opportunity to admit my mistake: yesterday, I mentioned USD 80 instead of USD 70 in this column). The pattern of ‘tensions in the Middle East = rising oil prices' is probably the best-known geopolitical and financial mechanism. Supply may be affected not only by the decline in Iranian production, but also by unrest in the Persian Gulf: one-third of the world's oil tankers pass through the Strait of Hormuz. We must also keep an eye on gas, since Qatar (20% of global LNG) exports only via Hormuz.
Washington stated that it is not involved in the operation, and that it was kept informed by Israel of its launch. The White House still hopes to reach an agreement with Iran during negotiations set to resume on Sunday in Oman.
Tehran has promised to respond. A first wave of drones has been launched on Israel. However, there is an asymmetry between the military capabilities of the two countries. In recent clashes, Iran's responses have rarely matched the damage caused by Tel Aviv.
The Middle East has nonetheless entered a new phase, and Israel has made it clear that the operation is only just beginning. In the very short term, the usual mechanisms of tension have kicked in. Oil, of course, but also the strengthening of the dollar (which is starting from a low base) and the Swiss franc. Logically, gold is also returning to test its recent record high.
The relationship between Washington and Tel Aviv is also under scrutiny. The sometimes contradictory statements made the day before by American and Israeli representatives do not help to gauge the temperature of the relationship between the two allies. One thing is certain: the rise in oil prices and the new conflagration in the region are disrupting the Trump administration's agenda and are likely to complicate its economic plans.
For the more anxious among us, there is plenty of literature on investing when this type of event occurs. But I cannot recommend highly enough the ultra-condensed survival guide by economist Joachim Klement, who published an update this morning. Spoiler: no, most conflicts do not have a lasting effect on the equity markets. Yes, selling in a hurry is almost always a mistake. The human reflex - extrapolating an end-of-the-world scenario from a missile - is exactly what the market prices too highly. For things to really go wrong, you need two dictators with free time and the arsenal to go with it. It's not impossible, but it rarely happens. Most of the time, wars don't kill markets, they temporarily disrupt narratives.
In Asia and Europe, indices are bright red.
Today's economic highlights:
- Dollar index: 97,975
- Gold: $3,424
- Crude Oil (BRENT): $74.09 (WTI) $72.05
- United States 10 years: 4.33%
- BITCOIN: $105,130
In corporate news:
- Adobe loses 1.5% in after-hours trading following its quarterly results.
- Trump praises Tesla after Musk backtracks in their feud.
- Thermo Fisher plans to sell part of its diagnostics unit for $4 billion, according to the Financial Times.
- China postpones approval of the $35 billion merger between Synopsys and Ansys, according to the Financial Times.
- Boeing was set to sell B737MAX and B787 aircraft to Royal Air Maroc. Meanwhile, the Indian government is considering grounding its fleet of B787s following the Air India crash.
- Tesla is raising the price of the Model X Awd and Model X Plaid by $5,000 in the US.
- Apple is targeting spring 2026 for the release of the delayed Siri AI update, Bloomberg reveals.
- GE Aerospace is postponing its investor day scheduled for Tuesday following the fatal crash of an Air India plane.
- The FTC is considering imposing restrictions on Omnicom and Interpublic to prevent the merged company from refusing to run ads on certain platforms for political reasons, according to the NYT.
- Meta Platforms invested in Scale AI, valuing the startup at over $29 billion.
- AMD introduces new AI chips to rival Nvidia.
- Nvidia adjusts financial forecasts by excluding China due to US export controls.
- Moderna received US FDA approval for expanded use of its RSV vaccine.
Analyst Recommendations:
- Darden Restaurants, Inc.: Jefferies upgrades to hold from underperform with a price target raised from USD 165 to USD 210.
- Fox Corporation: Zacks downgrades to neutral from outperform with a price target reduced from USD 63 to USD 57.
- Ge Vernova Inc.: Wolfe Research downgrades to peerperform from outperform.
- Kla Corporation: William O'Neil & Co Incorporated upgrades to buy from dropped coverage.
- Microsoft Corporation: William O'Neil & Co Incorporated upgrades to buy from dropped coverage.
- Newell Brands Inc.: JP Morgan upgrades to overweight from neutral with a target price raised from USD 6 to USD 7.
- United Rentals, Inc.: Redburn Atlantic downgrades to neutral from buy with a target price reduced from USD 960 to USD 760.
- Williams Companies, Inc.: Wolfe Research upgrades to peerperform from underperform with a price target raised from USD 51 to USD 60.08.
- Elf Beauty: B Riley Securities Inc. maintains its buy recommendation and raises the target price from USD 110 to USD 150.
- Oracle Corporation: Mizuho Securities maintains its outperform recommendation and raises the target price from USD 180 to USD 245.
- RH: BNP Paribas Exane maintains its underperform recommendation with a price target raised from 155 to USD 187.
- Wayfair Inc.: Piper Sandler & Co maintains its overweight recommendation and raises the target price from USD 46 to USD 61.
