Iran War Shuts Strait Of Hormuz And Sends Global Markets Into A Sustained Selloff

The U.S.-Israel conflict with Iran, which began on February 28, has effectively closed the Strait of Hormuz to vessels associated with the United States, Israel, and their allies, removing roughly 20% of the world's daily crude oil supply from global markets. According to independent energy research firm Rystad Energy, more than 12 million barrels of oil equivalent per day have been taken offline in the span of just over a week since the strait's closure. Brent crude briefly surged to $113 per barrel on Thursday before paring some gains, while European natural gas prices have climbed more than 60% since the conflict began on February 28. Iran escalated hostilities overnight by targeting Qatar's Ras Laffan LNG hub in retaliation for an Israeli strike on Iran's South Pars gas field, with officials describing the damage as "extensive." The S&P 500 has now declined 3.7% since the war began, and the average price for a gallon of gasoline in the United States has jumped to $3.84 from below $3 just one month ago.

For investors, the geopolitical shock has fundamentally reordered the near-term macro outlook by simultaneously threatening inflation and economic growth, the classic stagflation combination that equity markets find most difficult to navigate. ING Bank analysts Warren Patterson and Ewa Manthey warned that global oil flows remain largely restricted, and any further attack on Gulf energy infrastructure could compound supply disruptions well beyond current market pricing. Energy sector equities and integrated oil companies have benefited from elevated crude, but the broader consumer discretionary, transportation, and industrial sectors face margin compression as fuel and input costs rise. Markets globally remain highly sensitive to hourly geopolitical headlines, as Michael Antonelli, market strategist at Baird, noted that "everything's just trading with crude oil at this point." Investors should monitor Strait of Hormuz developments, Iran diplomatic signals, and any IEA reserve release updates closely, as de-escalation news could trigger rapid reversals.

Goldman Sachs Warns Of Rising Correction Risk And Cuts Confidence In The 60 40 Portfolio

Goldman Sachs issued a stark warning to investors this week, stating that U.S. and global equities have not yet fully priced in the geopolitical and energy risk premium from the Iran conflict, and that a meaningful stock market correction remains a growing possibility. Christian Mueller-Glissmann, head of asset allocation research at Goldman, wrote in a note on Thursday that "equities have not adequately incorporated enough risk premium to account for a more prolonged shock," adding that Goldman's economists have already observed a deterioration in the macro backdrop. The firm's long-term portfolio benchmark, which includes global equities, bonds, and gold, has declined approximately 4% since the onset of the Iran conflict. Crucially, Mueller-Glissmann cautioned that bonds may not serve their traditional role as a portfolio stabilizer in this environment, warning that "the risk of a significant drawdown in a 60/40 portfolio has increased." Goldman has shifted to a more defensive three-month asset allocation stance, favoring cash and going underweight on credit, while remaining neutral on equities, bonds, and commodities.

For investors, the Goldman note carries significant weight because it challenges the most basic assumption underpinning the classic balanced portfolio: that bonds will rise when stocks fall. In a stagflationary environment driven by an oil shock, both asset classes can decline simultaneously, eroding the diversification benefit that most retail and institutional investors rely upon. Peter Oppenheimer, a Goldman analyst, separately noted that equity risk premia have fallen back to pre-Global Financial Crisis levels, a condition that leaves equities with limited cushion if macro conditions deteriorate further. A separate Goldman analysis published in February identified that a 20% stock market correction could reduce U.S. GDP growth by nearly a full percentage point from the bank's current 2.5% fourth-quarter estimate. Investors may consider adding commodity exposure, cash, or inflation-protected securities as hedges, while avoiding heavy duration risk in fixed income until bond-equity correlations stabilize.

JPMorgan Cuts Year End S&P 500 Target And Flags Domino Effect Risk From Oil Shock

JPMorgan cut its year-end 2026 S&P 500 price target to 7,200 from 7,500 in a note published Thursday, citing elevated oil prices and worsening macroeconomic conditions stemming from the Iran war. The bank's strategists warned that if Brent crude remains above $90 per barrel for an extended period, equities could face a 10% to 15% correction from recent levels, which would translate to the S&P 500 falling toward the 5,600 to 6,000 range. JPMorgan described the risk as a potential "domino effect," in which initial selling pressure in U.S. stocks spreads to international and emerging markets, ultimately feeding back into weaker economic growth and further tightening financial conditions. Brent crude hovered near $100 per barrel throughout the week as markets assessed ongoing supply disruptions in the Persian Gulf. On a slightly more constructive long-term view, JPMorgan's economists see Brent crude eventually averaging around $60 per barrel in 2026 based on structural supply-demand fundamentals, arguing that the current spike reflects geopolitical noise rather than a lasting imbalance.

For investors, JPMorgan's target cut signals that one of Wall Street's most influential institutions has materially revised its base-case scenario for U.S. equities, with the oil shock now serving as the central risk variable. The bank's revised target of 7,200 still implies meaningful upside from Thursday's S&P 500 close near 6,606, but the path to that target depends heavily on energy prices moderating and the Iran conflict not escalating further into Gulf infrastructure. Emerging market investors face compounded risks, as dollar strength, higher oil import costs, and weaker growth exports tend to simultaneously pressure EM currencies, sovereign bonds, and equity valuations. Domestically, sectors with significant energy cost exposure such as airlines, shipping, chemicals, and consumer staples manufacturers are most vulnerable to sustained crude above $90. Investors may wish to closely monitor the $90 per barrel level in Brent crude as the key threshold JPMorgan itself identified as the tipping point for a broader equity breakdown.

The Bond Market Flashes A Bear Flattening Signal Not Seen Since Before The 2008 Crisis

A troubling set of conditions converged in the U.S. Treasury market on Thursday, drawing comparisons to the period immediately preceding the 2008 financial crisis. The yield on the 2-year Treasury note jumped as much as 21.8 basis points intraday to nearly 3.96%, ultimately settling 8.8 basis points higher at 3.83%, pushing it above the Federal Reserve's current federal funds rate target range of 3.5% to 3.75%. Simultaneously, the benchmark 10-year Treasury yield rose only 2.5 basis points to 4.28%, compressing the spread between 2-year and 10-year yields to approximately 45.1 basis points, down sharply from 51.5 basis points the prior day and from 74 basis points in early February. This compression is what bond traders describe as a "bear-flattening" pattern, a dynamic that has been building since early February and that typically signals that investors are bracing for a more restrictive monetary policy environment and deteriorating economic conditions ahead. The confluence of oil above $100 per barrel, a 2-year yield above the fed-funds rate, and an accelerating bear-flattening curve represents a combination of signals that markets have not seen simultaneously since the pre-crisis period of 2007 to 2008.

For investors, the bear-flattening dynamic carries implications far beyond the bond market itself. Financial institutions such as regional banks are directly hurt because their profit model depends on borrowing at short-term rates and lending at long-term rates, and a flattening curve erodes that net interest margin. Retirement-age investors who held 2-year Treasuries as a near-cash equivalent are now sitting on mark-to-market losses as the note sells off. More broadly, a 2-year yield above the fed-funds rate is a signal that the bond market is pricing in the possibility that the Federal Reserve may need to tighten further rather than ease, even as the economy shows signs of slowing. That dynamic is particularly damaging for growth and rate-sensitive equities, including technology, utilities, and real estate investment trusts. Investors should treat current fixed-income volatility as a leading indicator of broader financial stress, and monitor upcoming inflation data and Fed communications for any shift in the committee's tone regarding the path of rates.

Europe And Japan Form Coalition To Secure Strait Of Hormuz And Stabilize Global Energy Markets

The United Kingdom, France, Germany, Italy, the Netherlands, Japan, and Canada issued a landmark joint statement on Thursday committing to "appropriate efforts to ensure safe passage through the Strait of Hormuz" as the Iran war continues to disrupt global energy flows. The coordinated diplomatic and potential military action comes after Iran struck Qatar's Ras Laffan LNG hub overnight in retaliation for Israeli attacks, causing what officials described as "extensive" damage to one of the world's most critical liquefied natural gas facilities and a cornerstone of European and Asian energy supply. European natural gas prices surged 25% on Thursday alone and are up more than 60% since the conflict began on February 28, while Brent crude briefly touched $113 per barrel before retreating. The allied nations also pledged to support the International Energy Agency's record coordinated release of strategic petroleum reserves and committed to working with producing nations to increase output. European Council President António Costa framed the crisis as a long-term catalyst to accelerate the region's domestic energy transition and reduce reliance on imported hydrocarbons.

For investors, the formation of a multilateral coalition to protect Hormuz is the most consequential geopolitical development since the conflict began and has a direct bearing on energy prices, inflation trajectories, and central bank policy across the G7 and beyond. A successful reopening of the strait would represent a significant positive catalyst for risk assets globally, as oil and gas prices would likely retreat sharply from current elevated levels, relieving pressure on corporate margins, consumer spending, and inflation forecasts. Conversely, any Iranian escalation targeting additional Gulf energy infrastructure could push European gas prices to crisis levels not seen since the 2022 Russia-Ukraine conflict and force central banks to hold rates higher for considerably longer. Energy importers such as Japan, South Korea, and most of Europe stand to benefit disproportionately from a resolution, while domestic U.S. energy producers would likely see their recent outperformance fade. For equity investors, the coalition announcement introduces a diplomatic variable that makes positioning around energy prices more complex, as headline-driven volatility is likely to persist until the strait situation is formally resolved.

Financial Trends: Street expects modestly profitable 2026 with annual EPS in the low single digits on roughly flat to slightly lower revenue amid ongoing store rationalization and mix shift toward higher-margin categories.

Strategic Initiatives: Management continues pushing e-commerce, collectibles, and higher-margin peripherals while tightening SG&A and inventory to stabilize profitability after past brick-and-mortar declines.

Key Metrics: Investors will watch annual revenue run-rate, gross margin expansion, operating expense leverage, and full-year EPS guidance versus expectations for only modest profitability.

Progress: Recent quarters show improved gross profit despite softer sales as cost of sales declines and inventory discipline support better margin structure.
​
Focus Areas: Expect heavy focus on digital transformation traction, progress in non-physical gaming categories, and any commentary on capital allocation or balance sheet flexibility.

Risks Potential: Structural pressure from digital game downloads, competition from larger retailers, execution risk on new categories, and potential volatility from its retail-investor-heavy shareholder base remain key overhangs.

Concerns: Street skepticism persists around the sustainability of earnings without a clearly scaled growth engine, leaving results vulnerable if margins or sales backslide.

Market Trends: Secular shift toward digital game distribution and softer discretionary spending for physical media continue to challenge traditional game retailers despite niche demand for collectibles.

Financial Trends: Chewy enters earnings with expectations for mid‑single‑digit to high‑single‑digit annual revenue growth and expanding profitability after FY 2025 EPS and margins improved sharply into the black.

Strategic Initiatives: Management is leaning into autoship, higher-margin private-label offerings, healthcare and insurance services, and international expansion to deepen wallet share and improve unit economics.

Key Metrics: Investors will focus on net sales growth, active customers and autoship penetration, gross margin progression, and full‑year EPS and EBITDA guidance versus rising profitability expectations.

Progress: The company has already demonstrated a turn to sustainable profitability with FY 2025 revenue near $11.9 billion, improving net income and rising profit margins.

Focus Areas: Expect attention on customer growth reacceleration, cohort retention trends, and commentary on marketing efficiency and new verticals like vet services and insurance.

Risks Potential: Slower pet-category spending, intensifying competition from Amazon and big-box retailers, and execution risk in healthcare and international markets pose key challenges.

Concerns: Some investors worry that growth has decelerated from early-pandemic levels, making the story more margin- and retention-dependent to justify valuation.

Market Trends: The broader pet sector remains resilient but normalized, with steady demand shifting toward subscription models and value-oriented offerings amid a still-cautious consumer backdrop.

Financial Trends: Carnival heads into FY 2026 with consensus expecting continued revenue growth from the FY 2025 base of about $26.6 billion and further EPS expansion after adjusted EPS climbed to roughly $2.25 last year.

Strategic Initiatives: Management is focused on yield optimization, fleet modernization, debt reduction, and cost efficiencies while cross-selling across brands to lift onboard and ancillary revenue.

Key Metrics: Investors will watch booked load factors, net yields, fuel and unit costs, and updated FY 2026 EPS guidance versus current expectations around the mid‑$2 range.

Progress: The company has already delivered record revenues and higher EBITDA, showing tangible progress on post-pandemic recovery and margin rebuilding.​

Focus Areas: Expect scrutiny of pricing power for 2026 sailings, booking curves, and how management balances deleveraging with potential shareholder returns as earnings normalize.

Risks Potential: Macroeconomic softness, fuel price volatility, geopolitical disruptions on itineraries, and elevated leverage remain key risk factors.

Concerns: Some investors remain cautious on balance sheet repair pace and whether record demand can offset higher costs and interest expense through the cycle.

Market Trends: The cruise industry continues to benefit from strong experiential travel demand and value versus land-based vacations, though sensitivity to economic and fuel shocks remains high.

From a young age, Evan was fascinated by the stock market. At just 11 years old, he received a Wall Street Journal subscription for his birthday, sparking a lifelong passion for investing. Evan spent his formative years studying the strategies and philosophies of legendary investors like Paul Tudor Jones, Stanley Druckenmiller, and George Soros, absorbing their wisdom and developing his own unique approach to the markets.

As Evan's knowledge grew, he began to incorporate the time-tested, technically-based strategies of trading legends like William O'Neil and Richard Wyckoff into his own investment framework. By borrowing elements from each and rigorously testing them in real-time, Evan created a powerful conglomerate strategy that encompasses fundamentals, technicals, and macroeconomics.

Today, Evan is a professional trader and was a top contender in the 2020 US Investing Championship. His extraordinary performance, with a 141.8% return, is a testament to his studious background, well-informed approach, and unwavering dedication to his craft.

At the core of Evan's strategy is identifying stocks that benefit from sector trends and rotation. By combining fundamental analysis with a focus on relative strength and advanced technical analysis techniques, Evan is able to identify the stocks that are most likely to move higher or lower over the intermediate term.

While he keeps a close eye on macroeconomic trends, his willingness to adapt to changing market conditions, as well as his developed ability to know when to and not to act in a fast-moving market, is what sets him apart. Evan has consistently demonstrated his ability to navigate even the most challenging investment environments. His impressive track record and unique perspective make him a valuable voice in the world of finance, and he is thrilled to have the opportunity to share his insights and expertise with subscribers of the Bull and Bear Brief.