The Iran Conflict Enters a Second Week

As we enter the second week since the joint U.S. and Israeli strikes commenced, we highlight three key considerations. First, from a capital market perspective, the biggest variables driving implications remain duration and breadth. Simply put, the longer the conflict lasts, the greater its impact on the global economy. Breadth — or the number of countries and geographic range involved — plays an acute role in light of the region’s energy market and hydrocarbon output. As of Friday morning, Iran had attacked 12 countries including every country surrounding the Strait of Hormuz, which, pre-conflict, saw 20% of global oil supply pass through its waters.¹ Six of the world’s top 10 oil-producing countries are involved in the conflict in some way.² The longer the conflict lasts in intensity and the more countries involved, the greater the impact on the second variable, which is energy prices.

Energy is an input cost for consumers and businesses, and higher energy prices mean higher travel and freight costs, higher cooling/heating costs for office buildings and homes, increased supply chain expenses and construction material inflation. For shorter-lived conflicts, markets often look past ephemeral price spikes as higher initial prices can be met with supply. However, the now four-year-old Russia/Ukrainian conflict demonstrates that the initial price jumps can be durable; U.S. natural gas prices did not return to pre-Russian invasion levels for nearly 10 months. This morning, the Qatari energy minister warned that, even with an immediate end to the war, it would take “weeks to months” to return to pre-conflict output levels following drone attacks at a large liquified natural gas plant.³

Our assessment thus far is that the conflict will subject portfolios to volatility in the coming days and weeks, but, at this point, we do not anticipate a paradigm shift in the global corporate profit cycle that would drive traditionally riskier asset classes lower for longer. Further, we do not anticipate that credit markets will be impaired due to ongoing conflict. If we are wrong, it will be because of sustained energy prices that challenge a thus far resilient global consumer or because businesses alter spending and trading plans due to policy uncertainty.

We look at asset price ranges to assess what levels may represent important upward or downward breakouts or breakdowns. Brent crude serves as the world’s oil benchmark, and it has traded in a range between $58 to $100/barrel since September 2022 through today, where it hovers around $91/barrel. A sustained move above $100/barrel — for weeks or even months would indicate supply is having challenges meeting demand, and the likely economic impacts would shift our “glass half full” forward perspectives for diversified portfolios. In addition to Brent, we are paying close attention to natural gas prices in Europe (which have moved sharply higher) and in the U.S. (which have risen roughly 10% since the conflict’s onset— again assessing supply/demand factors.

Within the bond market, we are paying attention to U.S. Treasury bond yields, credit spreads (the additional compensation lenders seek from riskier borrowers) as well as private credit market dynamics. We cite the U.S. 10-Year Treasury Bond as global finance’s cornerstone due to its yield shaping mortgage and other lending costs. The “10-Year” as it’s known in Wall Street vernacular, touched a recent low yield of 3.89% following last April’s Liberation Day tariff announcement, but it has remained sub 4.5% since last summer and is currently in the middle of that range and rising due to inflationary concerns (more on that below). Credit spreads have been marginally rising from very low levels, and private credit jitters persist but are centered more on specific products and sectors.

Finally, for global equities, international stocks had performed very well prior to the conflict’s first salvo. Dollar strength, concerns regarding oil and natural gas price sensitivity and consumer activity have our attention along with company guidance and potential preannouncements, since we are largely through earnings season. Deficit and defense spending have fueled the recent European growth trajectory, and if governments shift their spending priorities to subsidize other activities, that could impact investor demand.

Each year, China issues a growth target serving to orient its many governmental layers, guide policy decisions and signal to investors and global businesses its aims amid current realities. On Wednesday, China set its lowest growth target since 1991, citing 4.5% to 5% as its expectation. During the release, Premier Li Qang noted, “the task of transitioning to new growth drivers is formidable. The imbalance between strong supply and demand is acute, market expectations are weak, and there are many risks and hidden dangers in key areas.”⁵

Through this release, China is publicly admitting a weak domestic consumer base and its challenges in stoking recurring consumer demand. Official Chinese economic data remains subject to skepticism, but private data we access suggests persistently high youth unemployment, an impaired housing market and stark divergences across income cohorts. Trade challenges also provide a more recent headwind for such an export-dependent economy.

Dour imagery aside, China’s global economic contribution remains paramount — not just because of its size, but because of China’s ambitions. It seeks a prominent seat at the global technology banquet, with its universities and think tanks angling for AI and supercomputer dominance. The Iranian conflict also reflects how important global connectivity is, and China’s Belt and Road initiative, which laid infrastructure initiatives between China and hundreds of countries — including many outside of the region of conflict — may prove increasingly valuable as Middle East tensions persist. China’s downward revision may prove to be akin to a golf opponent downplaying their handicap prior to the first tee; China wants to win on the global stage more so now than ever before, despite the hitches in their swing.

In assessing the corporate profit picture, we see significant value in juxtaposing fourth quarter 2025 earnings reports with the potential impacts from current Middle East tensions. Consumer and business activity can help provide a basis for how much absorption power exists to counter challenges that may emerge from the Iranian conflict. Further, analysts build expectations on top of current results, and, as we have detailed, we do not want to see forecasts get ahead of probable outcomes.

Results last quarter were very strong across virtually every major sector. The beleaguered technology sector demonstrated 21% sales growth and 33% earnings growth, with communications, utilities and health care also posting double-digit sales growth. Industrials and materials — two sectors where analysts reflected concerns around tariff impacts — showed 35% and 24% earnings growth, respectively. Only energy saw negative aggregate sales growth (by a scant 0.74%) and consumer discretionary earnings fell by an even smaller 0.6%.

Expectations, however, continue to migrate higher. Specifically, both 2026 and 2027 earnings expectations have ramped up in recent weeks, with 14% and 15% growth expected, respectively. As we have stated in our last few publications, we share the optimism, but we would expect some growth expectation pullbacks following the Middle East tensions, the extent of which will be a function of the conflict’s duration and breadth.

¹ https://www.reuters.com/graphics/IRAN-CRISIS/MAPS/znpnmelervl/ Accessed 6 March 2026.

² https://www.eia.gov/tools/faqs/faq.php?id=709&t=6. Accessed 6 March 2026.

³ https://www.ft.com/content/be122b17-e667-478d-be19-89d605e978ea. Accessed 6 March 2026.

⁴ https://www.federalreserve.gov/monetarypolicy/monetary-policy-what-are-its-goals-how-does-it-work.htm Accessed 6 March 2026.

⁵ https://www.bloomberg.com/news/articles/2026-03-04/china-softens-gdp-goal-to-range-of-4-5-to-5-as-growth-slows. Accessed 6 March 2026.