US has carried out targeted strikes on Iran's nuclear facilities over the weekend. B2 bombers used to deliver at least 10 GBU-57 MOP bunker-busters. Regime change not the objective, Trump has said. Iran has called an emergency UN meeting and vowed to retaliate. Hasn't done so yet. This is expected to come in two ways: strikes against US bases in the region and/or closure of the Strait of Hormuz (a quarter of global oil passes through it).
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What It Means for the Market and Our Reaction: The Good Need to stay objective when emotions (fear) are running high. We are in the heat of the moment. The effect on US company earnings is key. Is it going to have a material impact? Probably not. There is a 'chance' the market will ignore this completely. Iran itself is irrelevant in the stock market's eyes unless it leads to a wider escalation (other countries getting involved). The market isn't in downtrend. Hasn't even broken uptrend yet (chart below). Even if the Strait of Hormuz is closed, chances are political pressure will force them to reopen (both the US and China will want it open). It would need to be closed for months to keep the oil price sustained and reignite inflation. The Bad This is a serious escalation in the conflict. You and I need to sleep at night. Right now we're not. The market was struggling for momentumbefore Friday the 13th (Big Tech was keeping it going). This event has potential to cause a material pivot point. Fear and uncertainty are high. The market can look for excuses to sell when sentiment is damaged. This is an excuse.
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Nasdaq chart from Saturday – the index would need to fall more than 2% tonight to convincingly break uptrend.
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Brent crude – oil-related trades are a bet that Iran will close the Strait. Looks like a good bet this morning. We'll give it a day, but don't let us stop you.
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LYC Price at posting:
$9.15 Sentiment: Buy Disclosure: Held
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