The S&P 500 Is Up Despite Trump’s Gambit on Iran. Here’s Why.

Many had expected the worst for the stock market if President Donald Trump went ahead with strikes on Iran. And he did, and did so after an article came out that said he wanted to do strikes during the weekend to make sure the stock market does not react negatively. So far, things seem to have gone to plan, and the stock market is up today.

It’s still puzzling to many why that is the case, but it’s simple if you look into why Wall Street was so nervous in the first place. Investors expected Iran to react much more harshly if the U.S. bombed Iran’s nuclear site. The base case was that Iran would immediately send in a barrage of missiles across the Arabian/Persian Gulf into U.S. bases and oil facilities, triggering even more escalation. So far, that hasn’t happened, and Iran looks to be using much more restraint than previously thought. We’ll take a look at the nuances in a minute.

Here’s a market update as of 10:30 AM (ET) today.

• The S&P 500 is up 32.81 points, or 0.55%.
• The Nasdaq Composite is up 107.56 points, or 0.55%.
• The Dow Jones Industrial Average is up 163.81 points, or 0.39%.

Has Trump’s Gambit Paid Off? Wait Before You Celebrate!

It may still be too early to celebrate. The claims coming in pertaining to Iran’s nuclear facilities being decimated are still contested by many. Moreover, Iran’s parliament passed a bill that would authorize a blockage of the Strait of Hormuz, and it is awaiting final approval from the country’s Supreme National Security Council.

A blockage may happen, but the U.S. has asked China to stop Iran from doing that. 20% of all natural gas and crude oil flows through that checkpoint, and a blockage there would hurt not just the U.S., but also China, which is the biggest customer of Iran’s oil. Any instability in energy markets is not in China’s interests.

On the other hand, there have been signs that Iran is preparing a retaliatory strike against U.S. bases in the region. It is unknown how big or small this retaliation is, but if it involves American casualties, even accidentally, this is highly likely to spill over into a bigger conflict and tank markets worldwide.

Macros

• U.S. Existing Home Sales Change came in at 0.8% vs. the -1.25% forecast.
• U.S. Existing Home Sales at 4.03 million vs. the 3.95 million.
• U.S. S&P Composite PMI Flash at 52.8 vs. the 52.2 forecast.
• U.S. S&P Manufacturing PMI Flash at 52 vs. the 51 forecast.
• U.S. S&P Services PMI Flash at 53.1 vs. the 52.9 forecast.

Other Assets

• Crude Oil Futures are down 1.1% to $73.
• Natural Gas Futures are down 3.2% to $3.72.
• Gold Futures are up 0.3% to $3,396.
• Bitcoin is up 0.9% to $101,864.

The image featured at the top of this post is ©Openverse.