The U.S. is at war, but investors might have missed the memo. The stock market just had its best week since May 2025, buoyed by a “ceasefire” that has already been violated. Bombs are still falling, energy capacity in the region is still being damaged, and the Strait of Hormuz remains practically shut.
The exchange of words wouldn’t induce one’s confidence either. We only have a ceasefire because of an 11th-hour truce, arranged by Pakistan’s Prime Minister, who sought to stave off President Donald Trump’s threats to “wipe out a civilization” and “send Iran back to the stone age.”
But as negotiations square up this weekend, there is so little common ground, and the foreboding feeling that even more destruction may be impending weighs heavily.
The Trump Administration is reportedly preparing a new set of military action items if forthcoming talks collapse. Meanwhile, the President is posting on his social media website that “The only reason they [Iranians] are alive today is to negotiate.”
Despite the implication, the S&P 500 rose nearly 3.5% this week. It’s up 7.44% since Mar. 30. That is a truly jarring bounce for the index, which, all things considered, seems to be conveniently ignoring the economic toll that is starting to be felt. Even on Friday, as stocks rose, the economic impacts of the war were a prominent talking point.
Higher inflation arrives
On Friday, the Consumer Price Index for the month of March was released, showing that the rate of inflation tripled month-over-month on the record 21.2% spike in energy prices caused by the Iran conflict. It was the largest monthly increase in the record’s history (going back to 1967).
Inflation rose 3.3% year-over-year, accelerating from the 2.4% YoY in February. Core Inflation rose by a more modest 2.6% YoY, up from the 2.5% YoY reported last month.
The higher rate of inflation almost certainly precludes the Federal Reserve from entertaining interest rate cuts this year, something the President has repeatedly urged the Fed to prioritize during his first year and change in office.
At last glance, WTI Crude Oil was trading at $96.33/barrel, down from the nearly $117/bbl posted earlier this week after Iran hit one of Saudi Arabia’s key production plants. But given the dramatic swings in the oil market, WTI could again test the three figures in the event the ceasefire crumbles.
Consumer confidence hits a record low
The University of Michigan’s Consumer Sentiment Index fell to a record low in Apr. 2026, hitting 47.6. Americans’ views of both current economic conditions and future expectations plummeted, declining from the year before. The report singles out the fact that “many consumers blame the Iran conflict for unfavorable changes to the economy.”
A summary of the data states that, “Demographic groups across age, income, and political party all posted setbacks in sentiment, as did every component of the index, reflecting the widespread nature of this month’s fall.”
Much of this frustration, as many learned from the 2024 election, stemmed from prices. It turns out that maximizing employment was ultimately not as popular as tamping down on the aggressive rate of inflation stemming from the economy’s reopening after the COVID-19 pandemic.
Related: A timeline of the Fed’s ’22–’26 rate hikes & cuts (& what caused them)
The market has lost its mind
There are smart enough people who work in finance, but Wall Street prides itself a little bit too much on the mantra that “nothing ever happens.” And while the whole, that often is the case, overreaction can mean panic selling and missed opportunities.
I am not a bear, but this time, even if by some miracle a permanent resolution to the conflict were to be achieved, the disruption would be long-lasting. There is insufficient pricing of the current disruption, or the potential long-term disruption if this challenging environment continues.
The World Bank President said that the war would have a “cascading impact” on the global economy. In recent weeks, we have cataloged some of the ways that cascade could expand well beyond the oil markets: fertilizers, travel, and semiconductors, just to name a few.
Maybe the American investor can trivialize these impacts; perhaps the market can be immune to the country’s errors and questionable involvement in geopolitical entanglements. Maybe there are no worries because the country’s elite class has not felt them yet.
But absent a way to turn back time, there is a dearth of options wherein a cessation of the ongoing conflict can restore things to how they were just seven weeks ago, before the exchange of blows began. As it stands, free transit of key shipping routes in the Middle East is currently on the rocks. Energy and industrial capacity in the region, incredibly important to Europe and Asia, are being damaged in ways that will take years to rebuild.
And perhaps worst for the U.S., its desire to seek a swift withdrawal from the conflict without accomplishing its own goals puts Iran on more equal footing with other Western adversaries.
This is not a winning position. This is a losing position.
You would reckon that Wall Street is smart enough to price that in. Maybe they just don’t care; maybe they’ll buy whatever they’re sold. Can a few earnings calls wake them up? Or, seriously, are we to believe that nothing happening right now really matters at all?
