What Iran really means for markets
South Korea’s 16% stock plunge this past week. In the U.S., any inflation uptick could deprive investors of more interest-rate cuts. Or perhaps worse, the Federal Reserve could cut rates later this year, and depending on the circumstances, be judged by the bond market as giving President Donald Trump what he wants, but not necessarily giving the economy what it needs.A quick and tidy exit in Iran is no sure thing.
But even with one, America’s balance sheet looks unprepared for a recent pattern of rising military intervention, no matter how warranted. Below, some moves that investors should consider—and perhaps more important, skip.Few Americans will mourn the passing of a 37-year despot who called often for their deaths and, through his worldwide network of sponsored militants, occasionally achieved them. On the first day of trading following the initial decapitation strikes, the S&P 500 index closed flat, while the price of Brent crude jumped more than 8%.
Deutsche Bank called that only the 38th-largest one-day oil shock since 1990. But oil kept climbing and is now up 14%, to more than $83 a barrel.At risk isn’t just Iran’s output of around three million barrels a day, which is well behind America’s 13 million and Russia and Saudi Arabia’s 10 million apiece but still accounts for 4% to 5% of world supply. Iran also abuts the Strait of Hormuz, a maritime chokepoint that controls access to the Persian Gulf.
Here, shipping lanes that are barely as wide as Midtown Manhattan carry a fifth of the world’s oil and liquefied natural gas, including from Saudi Arabia, Iraq, Kuwait, the United Arab Emirates, and Qatar. For now, they are effectively closed by threats of attacks and fleeing cargo insurers.On Tuesday, a U.S. submarine
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